Trading Plan for 3/9
[pay]Pattern notes.
Friday’s steep opening surge was reversed into negative territory through late-morning. A bounce into the noon hour digested the volatility. The bounce meanwhile formed a critical pattern whose break would challenge bullish resolve (I published a chart of the setup). The break came, and S&Ps went, dropping 10 points in 2-1/2 hours.
The story doesn’t end there, but it took an unexpected turn, surging instead of dropping. Oh, is that all. Actually, it’s a critical factor. The last-hour’s move did comply with the template’s other characteristics: it measured over 20 points, pursuing a steep and relentless slope that ticked lower higher into the bitter end. In short, it was the correct outcome, with but one exception: its direction.
I can’t say nothing justifies the bounce. The bias-down target had been met, technicals weren’t deteriorating into lower lows at 665’75, and a 20+ point move had been triggered. New afternoon lows late-Friday are vulnerable to steep moves – my setup depended on it. That vulnerability applies also to steep swings. The outcome was diametrically opposite from expectations because the last hour’s new session lows were too late to be considered only a retest of prior lows, and because sellers controlled 3:20-3:30. Sellers established their position, earning themselves a rest, and then having the audacity to actually take it.
The surge’s squeeze-like proportions aren’t yet a problem for the decline. Despite extending still higher past the cash session close, the March contract settled under Tuesday’s prior lows. Bulls can rectify this by invalidating the interim drop – gaps up above 700’00, 710’00, and 724,00 would be increasingly persuasive on this point. I’ll assess strong intraday gains if they arise. Otherwise, a new trend low in Friday’s last-hour disallows it from being a trend’s low.
Indicators and Internals.
I mention above that RSIs weren’t deteriorating into the last-hour’s lows. But never to a relevant degree. Neither the 1-minute nor 3-minute readings was initially oversold for a retest to diverge positively. Each became quite overbought into the last-minute surge, so only a meaningful gap down can prevent some sort of extension Sunday night or Monday.
Monday’s opportunities.
The last-hour surge didn’t slice through the fails-safe buy signals at 673’75 and 679’00, so neither requires being retested as support. The signals have already been well-rewarded, so retesting either shouldn’t be possible by a mere retracement. But first things, first. The “Friday Factor” suggests that Monday will rally from its opening tick, because Friday’s opening and closing ticks both rallied.
This doesn’t prevent the opening tick from gapping down, but it does make it more difficult for an immediate dip from the opening tick. If sellers haven’t retaken control in obvious fashion by 10:15, then perhaps a bigger bounce is underway to 749’00 or 821’00. A bigger, bear market, temporary correction.[/pay]