Trading Plan for 4/28

A star is born… Bernanke’s answers were much less entertaining than the questions. While reporters set a precedent for broaching certain topics, Bernanke set only one precedent, and I’m not sure whether it was unintended – the market rallied sharply when he finished speaking.[pay]

Pattern points… (Setups and technicals)
Wednesday morning’s 6-point drop down to 1340.25 was relatively substantial. But it never behaved as if sellers were gaining traction for their effort. Recovering the morning’s 1346.00 high all but ensured that buyers would be rewarded for having absorbed the selling pressure.

They were rewarded by meeting the rally’s next higher target at 1353.25, which was tested up to 1354.25.

Buyers didn’t gain traction for their effort. The target was neutralized during the position-squaring window, and the position-squaring window was entered and exited at 1352.50. A similar setup at Tuesday’s high produced a 6-point pullback.

That drop was recovered. A similar drop to 1346.00 would also likely be recovered. Especially since overbought RSIs at Wednesday’s 1354.25 high created the requirement to retest it.

What’s Next… (Outlook and opportunities)
New trend highs in a session’s last half-hour just don’t suddenly launch new downlegs. Recovering to retest Wednesday’s high from a pullback down to 1346.00 could complete a top, if the retest of Wednesday’s high were rejected. Otherwise, closing under 1339.50 would be the earliest indication of momentum reversing down.[/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.