Trading Plan for 4/6
[pay]Pattern notes.
Friday’s session left outstanding a new lower price that requires a retest, the afternoon’s 824’50 bias-down signal. Its retest was put into play when the 833’25 bias-up signal held its noon hour test as resistance. The no-bias environment didn’t even try to test the target, and instead rallied up to 838’00. It was a no-bias rally, so it was doomed to failure, and it did fail completely. But its 9-point retracement stopped 5 points short of meeting the target.
The last 5 points might as well have been 50, since they required breaking key support after 3:35. That’s too late to try. Sellers did try, and as often happens to selling that starts after 3:35, the “weak hands” were trapped. The close 20 minutes later had recovered back to 838’00. Several minutes later S&Ps were 4-1/2 points higher. The trapped last-minute sellers aren’t accountable for that much gain. Recovering just back to 838’00 was already getting excessive. The new session highs were suspicious.
Nevertheless, Friday’s cash session was essentially an inside day, trading exclusively within Thursday’s range. (The pre-open surge up to 844’50 was only a retest of Thursday’s high, and only pre-open.) An earlier recovery back to Thursday’s highs probably would have extended much higher. But the market didn’t allot itself enough time, because it didn’t intend to use it.
Holding Thursday’s lows can be explained easily by their retest happening on a Friday when participants leave early. The aggressive late buying might have been exacerbated by their absence. There was also the memory of recent weekends that contained surprising favorable news. There had better be. Otherwise, Friday’s buying expended too much buying pressure to launch a breakout without outside influence.
Indicators and Internals.
3-minute RSI was overbought at the late rally’s high. The late rally’s high printed after the cash session close, so it does not require a retest.The 1-minute RSI also peaked then, so its retest is more likely, but still not required, and could be neutralized overnight.
Monday’s opportunities.
If Friday’s last half-hour rally deserved suspicions, then Monday’s open should gap down to retrace substantially all of its gain from the 830’00 area. The afternoon’s prior relative low is 828’50, and gapping under it would signal a session-long decline. Anything less could trade out the day ranging at recent highs. Initial strength beyond 845’50-846’50 might be breaking out, after all – and I look forward to hearing the news that justifies it. [/pay]