Trading Plan for 4/20

Never mind… My message in the Market Wrap was to expect no delay in extending the rally, if the rally were going to extend. The afternoon’s action had only firmed into the close. Then price exploded higher in reaction to spate of post-close earnings news. So, now that the rally has extended…

Pattern points… (Setups and technicals)
Monday’s session (highlighted yellow) developed exclusively in negative territory, and almost exclusively under all prior lows. This is pessimism. The session low was in the morning; the afternoon’s rally was not launched from an afternoon low. This is ineffectual.

“Ineffectual pessimism” can still be productive. Obviously. But it does not form a solid basis to launch a durable rally. That’s why Tuesday morning’s rally happened almost entirely overnight. That’s why Tuesday afternoon’s rally (highlighted green) began when the morning’s bias environment lapsed at 11:30. That’s why the afternoon’s bias environment was late.

And that’s why the next rally leg may have already happened, since Tuesday’s cash session close. S&Ps had already tested 1309.25 into the futures close. Post-close action quickly reached 1314.00 (red line).

The next objective was to test 1315.50, which defines Friday’s expiration close (circled red). Holding as resistance then kept alive last Wednesday’s bearish expiration signal. Similar  to Friday, 1315.50‘s resistance is equally relevant now. And similar  to Friday, 1315.50 may be probed intraday without buyers gaining traction.

What’s Next… (Outlook and opportunities)
If 1315.50‘s test intends to extend higher, then Wednesday should close above 1319.00. Otherwise, a close under 1305.00 (green line) is the minimum requirement to signal a corrective bounce has ended, and that the trend has reversed down.

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.