Trading Plan for 4/19

[pay]About that close (How the prior session ended)
There wasn’t much to Friday’s close, which is normal for expiration. The session’s last 90 minutes began just as a test of 1193.50‘s resistance was ending. Its reaction quickly fell back under the noon hour’s high to 1188.00. That left another hour, time enough for another round trip up to 1193.50 and back down to 1188.00.

The last hour’s last test of 1193.50 came too late for its recovery to have been credible. Its recovery could still be accomplished by proxy Monday closing above 1198.50. This was the high of 1193.50‘s first test. The presumption otherwise is that 1193.50‘s support failed to hold.

Pattern points (And technical influences)
Closing back under 1193.50 is a problem for the rally this week. It’s not the only problem. Friday’s close was also back under Monday and Tuesday’s 1192.75 closes (circled red), two sessions whose intraday probes above 1193.50 (red line) had failed. The upper-end of their consolidation can offer support when tested from above as “lower prior highs.” But closing under their closes indicates that their test as support Friday was not just arbitrary noise.

Meanwhile, there was no unfinished business left above. The only two higher closes were Wednesday and Thursday. Thursday’s attempt to extend higher flashed warning signs when its buyers failed to gain traction (highlighted red).

Although Friday’s gap down under Thursday’s lows neutralized Thursday’s new high close, I am a little uncomfortable that the gap back to Thursday’s close wasn’t entirely filled (circled green). Only its prior low was touched before extending down, and that’s a lot of pessimism to leave above the market. Nevertheless, its retest isn’t required.

Still, the most interesting feature to last week’s action is that the three-week old Complex Triangle pattern may be influencing a top. The brief time spent above its 1193.50 target last week was nominal and suspect. Friday’s sudden, steep and substantial drop was the exact character of a Complex Triangle’s reaction. Extending down Monday would confirm a much more sizeable decline underway.

Wednesday’s excess above 1193.50 makes a recovery possible, because it gave that much more room to absorb selling pressure. Monday will offer proof either way. Extending Friday’s drop intraday would be normal after an expiration. Intraday won’t be predictive, not like the close – not like a close under 1185.00.

Bottom line (My underlying premise)
1185.00 is the latest qualifying prior low. Closing under it would qualify as a trend reversal. It would be the first prior low broken on a closing basis, but not the first try. In fact, Friday’s low already took a swipe at it. So, it would be an understatement to call its retest “pivotal,”as breaking lower or not could determine the next major move.[/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.