Trading Plan for 4/23
[pay]Pattern notes.
Tuesday’s gap down removed from consideration the potential Island pattern. Too bad for bulls. This particular Island would have triggered a correction, but not enough selling pressure to trigger a new downleg. The correction would have been recoverable and the Island itself would have required at least a retest.
Not that no other potentially bullish pattern exists, but the only one that doesn’t require gapping up above ESm 1389’00 would instead require an almost immediate and relentless rally to begin. Tuesday’s lows provided a good launching pad, having held two tests of both Wednesday and Thursday’s closes to form a Double Bottom. But the last-hour rally already fulfilled a lot of its buying pressure to make a strong gap up less likely. Indeed, overnight strength has only edged higher to 1386’75.
Even if Tuesday’s drop did complete a pullback’s low, it was too shallow to refuel buyers for much more than an attack on Friday’s highs. A drop to 1375’00-1376’00 would allow another rally attempt but it wouldn’t compensate for the shallowness. Meanwhile sellers would have an opportunity to gain traction, especially since buyers didn’t really gain traction from Tuesday’s last-hour rally that stopped short of closing above any prior session’s lows.
Indicators and Internals.
Tuesday’s internal spreads were negative, but the ratio of up volume to down volume was equal to the ratio of advancing and declining issues it produced. Wednesday’s market isn’t obligated to reward either buyers or sellers for any relative productivity. That helps to account for the lack of much net gain overnight despite the volatility.
Wednesday’s opening setup.
MACD & RSI would become very important to consider if there were an early drop to 1375’00-1376’00 to give a rally a second chance. Even then, a reaction there could still easily be only a temporary bounce on the way to resuming Tuesday’s decline. If Tuesday’s last-hour rally tries to extend higher without first refueling, then it will need to maintain a gap up above Friday’s 1385’00 low. That’s actually being probed already, but not yet with any pattern that suggests it will extend higher. The econ calendar is light, but the earnings calendar is heavy.[/pay]