Trading Plan for 4/18
[pay]Pattern notes.
Thursday afternoon’s bias-up target wasn’t met until very late at the ESm 1370’50 high. The session settled back under the morning’s high to indicate there was no accumulation. The session was still interpreted as “ineffectual pessimism” that made higher highs likely, but the higher highs weren’t likely to be maintained.
The post-close surge had peaked at 1376’25 in an emotional extreme requiring a retest, which finally resolved after ranging sideways all night. At this point, since the surge had originated after Thursday’s cash session close, a drop would have been allowed and it would not have required a recovery. But a combination of strong earnings from Caterpillar and no negative surprise from Citi sparked a 15-point surge to 1390’00.
The potential for an opening drop hasn’t changed – only the level of its origination. Its consequence is much less likely to extend into a new downleg. More likely is that the balance of the day would be an exercise in working its way back to overnight highs. In case of no opening drop, the next higher high – and the highest calculable higher high – is 1394’00.
Indicators and Internals.
MACD & RSI began deteriorating about halfway into the 15-point surge, and then diverged negatively while consolidating under 1390’00 for the past 90 minutes. Thursday’s internals also diverged negatively with more up volume than down volume producing fewer advancing issues than decliners. The actual spreads were narrow either way, but it certainly wasn’t accumulative. Even more relevant is the contrast between this morning’s surge and the very recent indecision.
Friday’s opening setup.
There are no econ reports due today, and high-profile earnings reports are finished for the day, too. Back under ESm 1385’25 would target 1374’00. That’s still above yesterday’s highs and still likely to try recovering back to overnight highs. But any lower would target deep into yesterday’s range, and then start increasing the vulnerability to an afternoon dive.[/pay]