Trading Plan for 4/27

Wednesday night’s strength was tempered by… Thursday morning’s weakness. That allowed a rally to fresh highs, and a threat to the outstanding trend change signal. It also required very strong selling to develop Friday if the trend change would remain intact…

Pattern points… (Setups and technicals)[pay]
Thursday afternoon’s 1395.75 bias-up target was met. Its relevance was confirmed by an obvious reaction down. Its relevance didn’t end there. Three separate probes of fresh highs each returned back down to 1395.75. The cash session close equated to 1396.00, essentially 1395.75.

Also relevant is what was actually being tested by 1395.75 (see nearby chart): Apr 5’s 1390.25 gap (circled red), and the 1397.25 high (highlighted yellow) in the Apr 4-5 structure (circled red).

Closing above this structure would have reversed momentum up. That recovery is undermined by having probed its upper-end without closing above it. But closing above the structure’s 1397.25 high Friday would still be credible for extending higher.

Filling one outstanding higher gap is normal within the context of a corrective bounce. But there is no bearish reason to fill the next higher gap at 1408.00 (highlighted green). So, closing above the structure’s 1397.25 high Friday would put into play new highs above 1418.00 (circled black).

A second consecutive higher close Friday would also confirm Wednesday’s recovery above 1386.00. That which would neutralize the bearish trend change signaled by originally breaking under 1386.00. Avoiding a higher close Friday would maintain the original bearish trend change signal. But a close under 1386.00 would be preferable, at least for clarity’s sake.

[/pay]What’s Next… (Outlook and opportunities)[pay]
An immediate reversal down probably wouldn’t be sponsored by strong hands, not unless forcible enough to open under a relevant level like Wednesday’s 1387.50 highs, or Thursday’s 1381.00-1383.00 pre/post-open lows. This post-close dive (see nearby chart) on Spain’s downgrade is retesting Thursday afternoon’s 1390.25 bias-up signal as support — that would be too shallow, and back above 1392.00 would suggest a retest of 1395.75 or fresh highs was in-play. [/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.