Trading Plan for 4/8

[pay]About that close (How the prior session ended)
The afternoon’s no-bias environment lapsed into a test of the morning’s 1182.50 bias-down signal. Its retest into the session’s last major timing window was redundant, and reflected shallow sponsorship among buyers. The drop extended down sharply to attack 1173.00.A bounce off the low peaked upon testing 1179.00 as resistance, which was still being tested as resistance into the close.

Pattern points (And technical influences)
A close under the morning’s 1179.00 low would have triggered a very bearish setup. While the close didn’t clearly break under 1179.00, neither was 1179.00 clearly recovered. A signal that tries to form, but does not, often signals the opposite resolution.

Like Wednesday morning’s indecision at 1182.50, Wednesday’s close at 1179.00 might still bounce a little further. But a rally environment would have clearly recovered 1179.00, or avoided probing 1179.00 altogether.

Last week’s complex pattern projected several candidates for new highs, with the likeliest resolution being a major downleg. The first two targets were met Tuesday and held on a closing basis. Wednesday afternoons sudden and steep rejection of its intraday recovery could be serve as the resolution’s first downleg. The next one would be substantial.

Having avoided closing decisively under 1179.00, there’s still a window open for resuming the rally. Now that sellers have come out into the daylight, they can’t afford too much of a bounce before pressuring price lower. Buyers would start gaining traction above 1182.50.

Bottom line (My underlying premise)
The market is at a critical juncture, vulnerable either to dropping sharply or else to extend the rally substantially. Steep drop, or higher targets. Wednesday’s behavior is entirely appropriate for this stage of the pattern that preceded it, and for launching the decline scenario. So if sellers can’t find sponsorship to exploit the setup, then they’ll pay a heavy price with a bigger rally.[/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.