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Trading Plan for 4/8 – If, Then… Market Timing

Trading Plan for 4/8

By Rod David | April 7, 2011 - 5:43 pm

Did the earthquake exacerbate the drop that was already signaled? Thursday morning’s no-bias signal held at 1334.50, which put into play a test of 1327.75. The drop to 1322.25 fulfilled it. The balance of the session swung back-and-forth, narrowing its range into the morning’s 1327.75 target. The target was still being tested at the close within 1 tick. So, not only did the earthquake accelerate the target’s test, it also prolonged it.

Pattern points… (Setups and technicals)
It always seems amazing how limited of an effect disasters have on markets. A sell-off that might have happened over days may run its course over hours. And premature selling may trap shorts to help fuel another rally leg. But it’s not really amazing. Only one market condition can maintain a negative reaction – a market that is already trending down. But Thursday’s market was only reacting down from a rally when the quake hit.

Thursday’s last 60-90 minute period firmed. But it didn’t trend higher, and didn’t gain traction to all but ensure extending higher the next day. So long as sellers haven’t gained traction, sometimes not rallying can be bullish by leaving something on the table. So, while Thursday’s close doesn’t ensure trending higher Friday, it does leave that door open since sellers didn’t gain traction for all of the energy they expended.

If there’s any lower low here to be had it will fill the gap back to last Thursday close, probably even probe it by 2-4 points. Recovering early enough from fresh lows could still launch a rally into the weekend. Rallying first, without any more dipping, would be vulnerable to peaking upon testing new highs.

What’s Next… (Outlook and opportunities)
Various resistance above begins at 1331.00, then 1332.25 and 1333.50. Their recoveries would be likely to extend higher into Friday’s open. The next higher target area remains 1338.00-1340.00. Breaking lower under 12325.00 would target the gap back to Thursday’s 1321.75 close, probably even probe it down to 1319.75 or to 1317.50.

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.

Posted in Market Wrap, S&P