Trading Plan for 4/3
[pay]Pattern notes.
Thursday’s open neutralized all unfinished business above – last Friday’s 821’25 highs, last Thursday’s 827’25 close and Thursday’s 830’50 high. A reversal down would have been as normal as the reversal up from Wednesday’s opening gap down. Thursday’s buyers were slowed, but otherwise undaunted. The open’s consolidation eventually broke higher to touch 842’25.
But buyers had a problem. Despite gapping up, the open had around last Thursday’s high through 10:15 and 10:30. This had essentially indicated a quasi no-bias environment, and the break higher came afterwards. The extra gain was undermined for having originated in a “no-bias” environment.
The afternoon’s retracement probed the opening range’s upper-end as support, which failed to resume the rally. The 828’75 10:15 price was finally retested as support with 10 minutes remaining in the session. The level was barely recovered from being probed by 2-1/2 points down to 826’25 – the Globex open firmed further up to 837’25.
The morning’s quasi no-bias rally is interesting, although probably not predictive. Much more relevant is how it created unfinished business and then neutralized it the same day. Its eventual resolution also fell far enough to test the opening gap. These are characteristics of equilibrium, which suggests two possible paths Friday. One path is the normal setup whose initial trend is reversed more substantially in the opposite direction. The other path would simply gap beyond either end of Thursday’s ~826’00-842’00 range and extend in that direction.
Indicators and Internals.
Technicals were predictive of topping at Thursday’s highs. There was no unfinished business at the close. The 3-minute RSI did become oversold while the last-minute dive made new afternoon lows, but the next bar printed a lower price and recovered, taking RSI along with it.
Friday’s opportunities.
Anxiousness ahead of Friday’s Employment Situation report helped to inhibit trending at all Thursday. The reaction should be volatile, but if a gap is maintained beyond either end of Thursday’s ~826’00-842’00 range, it should extend in that direction. More econ data follows at 10:00, timing that tends often either to reverse or to accelerate any initial trending. And at last word, Bernanke is scheduled to speak at noon.[/pay]