Trading Plan for 4/12

Optimism isn’t a bad thing, unless it is absorbed… That’s where Monday’s open found itself, reversing the overnight optimism that had tried to extend into the cash session. Monday’s close found itself in a similar situation, bouncing off the late lows. But its post-close retracement absorbed that optimism, making new lows likely.  [pay]

Pattern points… (Setups and technicals)
Monday’s drop to 1317.00 neutralized both the morning and afternoon’s downside objectives. A test of the morning’s 1319.25 bias-down signal was put into play when no-bias triggered after testing the bias-up signal. And the afternoon’s bias-down signal triggered the 1318.25 bias-down target.

Monday’s last downleg probed both objectives. The targets didn’t necessarily hold as support, but they were at least still being tested through the close. Sellers didn’t lose traction, but they didn’t renew the drop’s momentum.

Momentum can reverse up by probing 2-3 points under Monday’s lows and then recovering positive territory as the opening sequence ends. Gapping up above a prior relative high could reverse momentum up, too, but that would leave unfinished business below back to Monday’s 1320.00 close. And that attraction below could resume the decline.

What’s Next… (Outlook and opportunities)
There is noise for room under Monday’s lows down to either 1315.50 or 1313.75. Extending through either after touching it would renew the drop’s momentum, next targeting 1303.00-1304.00. Recovering their test(s) back into positive territory through a relevant timing window could trigger a rally back up through last week’s highs.

Firming only to the 1324.00 area would remain vulnerable to reversing down, targeting 1315.50 or 1313.75. Gapping up through the 1324.00 area would trigger a bigger upleg intraday, perhaps to 1331.00 before reversing back down. [/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.