Trading Plan for 4/21
[pay]About that close (How the prior session ended)
An opportunity to reverse down before noon was missed when the morning’s bias environment lapsed after 11:30. Another opportunity arose when the afternoon’s bias environment started lapsing after 2:30. But trending down through 3:10-3:20 bounced off of 1202.00 instead of breaking it.
The cash session closed under session highs at 1203.75, right at the afternoon’s bias-up target. Futures added 2 points to probe session highs into the Globex open, and another 2 points to 1208.50 reacting to AAPL’s earnings.
Pattern points (And technical influences)
The gap back to Thursday’s ~1208.50 close was Tuesday’s potential upside. It has now been filled. It wasn’t filled intraday, but that won’t matter if Wednesday’s open gaps down under Tuesday afternoon’s 1201.25 low. In fact, this setup would trigger a session-long decline.
There is otherwise room down to 1203.00 before sellers even begin gaining traction. Dipping into this area at Wednesday’s open would still be likely to retest the overnight high – whether 1208.50 or higher.
But a post-open bounce from the 1203.00 area during Wednesday’s initial 15 minutes of volatility would also be vulnerable to reversing back into negative territory through the open. Tuesday’s template that would have rejected the open’s gap up could still take effect, albeit one day later on Wednesday.
Not rejecting a higher open, or maintaining a recovery from an initial dip, would next target a probe above last week’s highs. A reaction down would be likely, and sellers could gain traction from it, but probably not.
Bottom line (My underlying premise)
Gapping up Wednesday won’t determine the balance of the morning, but it would at least make any morning sell-off likely to recover. If this week’s bounce is only corrective, and a bigger top is forming with last week’s high (as already suggested by Friday and Monday’s closes), then it should be obvious before Wednesday afternoon.[/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.