Trading Plan for 4/28

[pay]Pattern notes.
S&Ps closed Friday higher than any print since January’s last downleg got underway, and finally higher than each recovery attempt since then. The nearby chart is of S&P cash (not futures), and shows the path I traced out as February was ending. This is the template for a durable, long-term bottom. The lower low and its rejection played out pretty much on schedule. But note the last leg’s predicted trajectory. It isn’t precise, but it’s not arbitrary, and the recovery may have taken too long compared to the time between the two lows.

Basing is one thing, but S&Ps have been rallying since March’s low. And the prior high is about to be exceeded by as much margin as there was at the prior low. That has already started bringing optimism to extreme levels. The corrective targets have been long-standing at ESm 1410’00-1415’00 and potentially 1445’00. A competing interpretation appeared recently, either targeting 1425’00 or else a rejection of the next intraday rally attempt. Regardless, this is a critical juncture, with longer-term implications, and a resolution that should be known fairly soon.

Indicators and Internals.
115% more NYSE up volume than down volume Friday produced only 70% more advancing issues than decliners. Monday’s market is obligated to reward Friday’s sellers for their relative productivity, whether by dipping initially or by rejecting an early gain. Either one seems plausible considering that MACD & RSI diverged negatively on a very last-minute retest of the last hour’s high. A Sunday night dip wouldn’t qualify as providing that reward, regardless of whether there were a recovery into the cash session open.

Monday’s opening setup.
Wednesday afternoon’s FOMC interest rate decision probably won’t start influencing price action until Tuesday. Normally it wouldn’t start until Wednesday morning, but this one is perhaps the most controversial in months – if not in years. Reaction to econ reports before then could be exacerbated as it is interpreted one way or another for swaying the FOMC decision, but no reports are due until Tuesday. The FOMC focus might also mute Friday’s reaction the Employment report. Meanwhile, there is room down about 5 points from Friday’s close to ESm 1392’50 to refuel buyers. Two points lower than that and sellers would start gaining traction for something more dramatic down to 1377’50 and then potentially much, much further.[/pay]

Programming note.
Join me in the charting room after Thursday’s close for a live webinar presentation of “Basic Skills: Reading MACD & RSI.” It is a somewhat updated version of one we had on the same topic February. This one will be recorded, and then followed by others in an ongoing series. Passwords will not be required, so you are welcome to invite any others to attend.