Trading Plan for 4/29
[pay]Pattern notes.
Monday afternoon’s highs twice touched ESm 1404’00 without breaking higher. Despite overnight highs less than 1 point higher, a last half-hour dive to 1395’25 attacked session lows. The drop’s timing was inappropriate for new trending so it is less likely to extend down. Its origin was also “ineffectual pessimism” that couldn’t bear to test the overnight high. By closing back above ESm 1397’25 sellers started losing traction, and back above 1400’00 overnight would start to signal that buyers were gaining traction.
At the risk of sounding like a broken record, the paralysis was too much too early for pre-FOMC news, even for a decision as controversial as this week’s. This market is nervous. Or, at least, it wants to be nervous. So knee-jerk buying in reaction to Tuesday’s econ reports might quickly settle back into the range. 
That doesn’t make rallies impossible – they might even be more likely than a substantial or sustained drop. But knee-jerk selling might offer a more compelling long-entry opportunity.
Indicators and Internals.
MACD & RSI diverged positively on 1-min charts as S&Ps completed the late 9-point drop (see the nearby chart). Longer intervals did not reflect that, or haven’t yet. Friday’s last-minute price action was similar, in that technicals diverged negatively and Sunday night’s initial response weakened. Internals diverged positively as 15% more NYSE up volume than down volume produced 45% more advancing issues than decliners while S&Ps closed negative on the day. Similar to Friday’s internals, only more so, Tuesday’s session is obligated to reward Monday’s buyers for their relative productivity.
Tuesday’s opening setup.
Two retail sales reports are due before Tuesday’s open. Consumer Confidence is due 30 minutes after the open, timing that tends to accelerate or reverse any initial trending. The reaction to each report could be exacerbated as participants interpret data to predict Wednesday FOMC interest rate decision – just imagine if the data contained a surprise. (The same will be equally true for Wednesday’s reports.)[/pay]