Trading Plan for 4/13
[pay]Pattern notes.
Pullbacks can resolve the same as when pushing a balloon under the water’s surface: it pops up dramatically upon letting it go. That explains Wednesday night’s 20-point pre-open gain after S&Ps had been pushed down under 819’00-822’00 for three consecutive sessions. Intraday attacks on last Sunday night’s 848’00 highs also kept S&Ps from floating any higher, until Thursday’s last 90 minutes rallied to 854’50.
Analytical note: Fridays are vulnerable to trending up or down sometime during their last 90 minutes if the open’s trending doesn’t extend through the noon hour. This also applies to the last session of the week in case of a three-day weekend. Had Thursday’s opening surge extended through the noon hour, then the last hour would likely have ranged sideways.
Pop-ups last only so long unless the balloon is filled with helium or it catches an updraft. So, was this balloon filled with helium? Did it catch an updraft during Thursday’s last 90 minutes, and will it catch another on Monday? Probably, but only briefly if there’s no delay. But not at all if Monday’s open gaps down under Friday afternoon’s 843’00 low to invalidate the later rally. So, recovering from modest weakness is the best chance for trending up considerably.
What of the topping process that had been developing around the 844’00 prior highs? If the month-old bear market rally is ending, then Thursday’s higher high must prove to have been a test and not a breakout. This is possible, so far, since the prior highs were the midpoint to Thursday’s range. That is, until the late rally, but the rally’s 854’50 peak tested the noise range’s upper-end around (a 10-11 point dip down instead was just as possible).
Most breakouts can be dismissed as a retest of prior extremes, or noise around the retest. This is why a valid breakout requires the confirmation of a second consecutive close in the breakout’s direction. Confirming Thursday’s breakout would all but ensure the bear market rally persist well into summer – not necessarily much high, just much longer. If the bear market rally is topping and Thursday’s late rally was only noise around the retest of prior highs, the evidence would be a near-immediate reversal down.
Indicators and Internals.
Thursday’s last-minute high was probed by 1 tick right after the cash session close. Both 1-minute and 3-minute RSI diverged negatively. The interim low was shallow enough for its minimum pullback target to be met easily, and not leave unfinished business below, so the burden of proof is still on sellers.
Monday’s opportunities.
A pullback has several points of room down to 849’00-850’00 before retracing more of Thursday’s late gain. Any lower would threaten Thursday’s noon hour lows down to 842’25, whose break would put into play 827’25. All of which is just a detailed way of saying, the top would be in. Confirming Thursday’s breakout would be less restrictive to the upside, and its next target would be a function of Monday’s opening range. The econ calendar is empty, so earnings news could be critical.[/pay]