Trading Plan for 4/30

[pay]Pattern notes.
Tuesday afternoon’s recovery back to Monday’s close didn’t have time to pause if it hoped to beat the session’s last timing window that was shutting at 3:20 ET. But each successive pullback limit was broken as the drop extended into a close back under the afternoon’s prior highs. This setup robbed buyers of their traction and classified the afternoon’s range as distributive. Wednesday’s open became vulnerable to a steep drop – albeit a relatively shallow one – a drop that could be avoided only by gapping up above Tuesday’s highs.

Citicorp announced a secondary after the close that forced the Globex open down 3 points (circled on the chart). This is a retest of the morning’s ESm 1389’00 bias-down target that had held session lows. Could this serve as the consequence for buyers losing traction? Possibly, but there is room back up to 1394’00-1394’50 before making that call. Meanwhile there is room down to 1383’25-1384’75 if 1388’00 doesn’t hold here as support. (The target area was originally mis-typed 10 points higher.)

Indicators and Internals.
Tuesday’s negative internal spreads were fairly balanced to each other, so Wednesday’s session isn’t obligated to reward either side. Tuesday’s session never rewarded Monday’s buyers for their positive divergence, which might have aided Tuesday’s recovery. MACD & RSI weren’t particularly helpful at the afternoon high, which may have aided the afternoon drop.

Wednesday’s opening setup.
Despite the post-close drop in reaction to Citi’s news, a runaway decline isn’t yet indicated. First impressions are sometimes correct, and it’s interesting that S&Ps only dropped a little. Does that confirm this pullback has been a defensive move to help absorb Wednesday’s FOMC news? Did the Citi news send that best-laid plan awry? Overnight price action should make that clear either way. The morning’s pre-open econ reports should spark volatility, and another report due 15 minutes after the open will try to keep things alive. But volatility should recede by late-morning ahead of the 2:15 FOMC interest rate decision.[/pay]