Trading Plan for 4/11

Do QE programs continue during a shutdown? That’s not why Friday dropped 17 points from the morning’s 1335.75 high. It was the morning’s 1326.00 target, which had been left outstanding through the noon hour. Its attraction below was leveraged by the weekend’s impending illiquidity, and by another lower attraction down to 1319.75. However, this might be a glimpse of market behavior when the Fed takes away the punch bowl,[pay]

Pattern points… (Setups and technicals)
1-minute and 3-minute RSIs were simultaneously oversold at Friday’s 1318.75 low, requiring its eventual retest. Its oversold bounce up to 1325.25 took 1-minute RSI to overbought, so the bounce may have ended.

Did Friday’s sellers steal a page from the play book employed by Thursday’s buyers? The tactic is patience. Thursday afternoon’s short-squeeze setup wasn’t triggered, which left something on the table to extend higher overnight. Now Friday afternoon’s sellers allowed the closing bounce to get overbought.

Notice also that Friday’s 1318.75 low first printed before 3:00. The bounce that was launched just minutes later trended up into the closing minutes. These elements form the basis of a “session-long decline.” The setup could be triggered Monday by dropping through or gapping down under 1318.75.

I’ve painted a pretty bearish picture above. It’s the inverse of my warning before Friday’s open: “The bullish influences are so clear that not trending up this morning would suggest some underlying bearishness preparing to appear later today.” Friday’s sell-off even may have triggered a trend change. So, not trending down Monday would suggest another fresh high was coming.

What’s Next… (Outlook and opportunities)
The 1321.00-1326.00 range is essentially neutral ground. Leaving it in either direction through a relevant timing window would be likely to trend next in that direction. Trending down would confirm that sellers gained traction Friday. But if their efforts weren’t successful, then Monday’s oppen is likely to gap up, and extend sharply higher.[/pay]

Look for at least one update overnight or ahead of the Morning Market Tour… My thoughts on the day’s econ calendar are linked here.