Trading Plan for 4/10
[pay]Pattern notes.
Did it, or didn’t it? S&Ps closed under last Friday morning’s ESm 1365’00 low to signal that momentum has reversed down. The margin wasn’t narrow – 9 points for the cash session close, and 4-1/2 points for futures. There is a 24-hour window for the break to be invalidated by recovering on a closing basis today, or else by gapping up Friday above the break’s last relative high (Tuesday afternoon’s 1371’00).
Wednesday’s closing action made the signal’s invalidation more than just a possibility. The afternoon’s first low bounced neatly from the morning’s 1352’50 bias-down target, and a lower low was recovered. Only futures closed above the two lows’ interim high, the underlying cash index did not – a buy signal would have triggered had the cash session also exhibited such strength.
Even if a buy signal had triggered, it would only indicate an intraday reaction. That would only give buyers a chance to gain traction and close above 1365’00 to invalidate the break. The futures close could have been an aberration, but it will need to be rejected very early Thursday to avoid dragging the underlying cash index higher with it.
Indicators and Internals.
MACD & RSI firmed at the afternoon’s lower lows, but not from oversold levels, so the bounce it produced may be only a bounce. Despite the session’s loss, internals ended the day with sellers underperforming buyers: 3.6 times more NYSE down volume than up volume produced only 2.5 times more declining issues than advancers. The obligation for Thursday’s session to reward buyers with a bounce is mitigated somewhat by the post-close surge; it would be altogether moot if the open were to gap under Wednesday’s lows.
Thursday’s opening setup.
At this moment S&Ps have dropped back to yesterday’s cash session closing level, and through it by more than 2 points to ESm 1353’75. That’s after extending the post-close bounce up to 1362’00. If maintained through the open, this degree of rejection would be sufficient to confirm the signal that momentum is reversing down. Buyers have another 4-1/2 hours to save the day, the week, and probably the S&P 1300 century mark.[/pay]