Trading Plan for 4/20

[pay]About that close (How the prior session ended)
The risk was definitely to the upside during Monday’s last hour. Sellers had lost traction when the noon hour’s new low at 1179.75 was recovered back above prior lows. A dip to 1181.00 was already recovering when the afternoon’s no-bias environment started lapsing. The cash session close was in the process of testing 1193.50, and the futures close surged to touch 1196.50.

Pattern points (And technical influences)
Monday’s session formed the basis for a bullish “Pivot Reversal” setup. The open’s gap down recovered into positive territory, but reversed down to probe Friday’s prior low. The pattern identifies momentum shifting from one direction to the other if the close then recovers above the morning’s high.

Since Monday’s close was probing the morning’s high, the Pivot Reversal setup gets at least some benefit of the doubt. Some… Extending higher into the futures close doesn’t give the setup any extra benefit. In fact, extending higher borrowed from the pent-up buying pressure needed to maintain the buying pressure overnight.

In addition to the borderline close, the Pivot Reversal is only as meaningful as the leg it is reacting to. The most recent downleg began Thursday, so extending higher early Tuesday should find out soon enough whether Monday’s bottom is only temporary.

Bottom line (My underlying premise)
Recovering 1198.50 at Monday’s open or close could have signaled that Friday’s selling was absorbed. Decisively recovering 1193.50 would have been interesting. But the lateness of the excess reflects weak hands buying. This sponsorship may yet be leveraged by stronger buyers if Tuesday’s open were to recover from a deep enough pullback. But simply extending higher from Monday’s close would stretch buyers thinly.[/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.