Trading Plan for 4/5

Monday’s inside day didn’t offer new clues… other than to narrow down the templates being tracked. Nothing suggests the base may have firmed enough to extend the rally. The only question remains whether extending the rally will even be attempted. [pay]

Pattern points… (Setups and technicals)
Friday’s fresh high wasn’t likely to extend higher MondayFriday’s fresh high was a breakout, and breakouts require confirmation by closing higher the following day. Monday’s don’t often confirm Friday breakouts.

Closing positive was irrelevant, since Monday’s 1330.25 opening print and its 1332.75 opening high weren’t recovered. But a bounce had room up to 1330.00-1331.00 without even beginning to gain traction. Relative to the 1328.50 cash session close, that’s 2-3 points of potential upside left on the table.

Futures did extend up to 1330.00, which does diminish some of the attraction above. At least the afternoon probed negative territory when it fulfilled the 1324.75 target, busting a bearish “ineffectual optimism” setup that had been forming. And 1324.75‘s test, has neutralized the near-term attraction below, as did Friday afternoon’s dip under 1325.75.

Two consecutive unconfirmed breakouts are followed almost as often by a third probe of fresh highs. So, I’m not ready to discount the potential for probing prior highs. An ugly open Tuesday would change that.

What’s Next… (Outlook and opportunities)
Maintaining a gap down under Monday afternoon’s 1324.75 low would make higher highs much less likely anytime soon. Any lesser opening weakness would likely recover intraday. And probing Monday’s 1332.50 high would all but ensure probing new highs.[/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.