Trading Plan for 4/23

[pay]Pattern notes.
Well, that was interesting. the morning’s rally robbed sellers of their traction and tried to duplicate Tuesday’s intraday recovery. The bounce’s high stopped short of its target, a test of Friday’s 857’50 lows. The pessimism helped to limit the pullback’s duration, but buyers didn’t gain any new traction on the afternoon’s higher high. All upside potential had been fulfilled, but the day’s clock had yet to run out. What to do, what to do…

The last half-hour’s slide to new session lows seemed an odd way to reconcile the day. But it was entirely appropriate since any sell signal would target the lows. The slope was simply a function of there being so little time to fulfill the target. Had the setup appeared earlier in the day, its path would have been much less direct.

There is a flip-side to this setup being fulfilled so quickly, in that sellers didn’t gain new traction. All they accomplished was a return back to the origin of Wednesday’s bounce. And they’ve expended a lot of energy doing so. This is a sly trick that trends use to absorb counter-trend action, similar to how Monday’s drop bottomed. The difference this second time is it is the second time. Trends don’t get to use the same trick repeatedly. That having been said, resuming Wednesday afternoon’s drop at Thursday’s open requires gapping down. Not gapping down Thursday would almost be bullish.

Indicators and Internals.
Simultaneous negative divergences among 1-minute and 3-minute MACD & RSI correctly predicted the last-hour’s highs. Positive divergences accompanied the last-minute lows, suggesting potential for a bounce overnight to the 846’50 area. So far, GM’s summer vacation news is overshadowing earnings news from AAPL and EBAY and leaving S&Ps stuck near Wednesday’s lows.

Thursday’s opportunities.
Earnings continue to influence price action, both in reaction and in anticipation. Thursday’s econ reports are high-profile, as well. But most relevant to Thursday’s open might be the overseas markets, and how they reacted overnight. Firmer overseas markets that don’t trigger a double-digit gain in S&Ps would suggest more downside planned intraday. [/pay]