Trading Plan for 4/8
[pay]Pattern notes.
Monday’s last-minute low touched three of the past four session’s closing prices before bouncing to close above them all, thus avoiding (narrowly) a “Gotcha!” setup. That was the cash session. S&Ps dipped after the cash session in reaction to one earnings surprise, closing under the highest recent close. S&Ps continued falling on another earnings surprise, extending to ESm 1364’25, nearly 10 points under Monday’s cash session close.
The overnight price action is consistent with a Gotcha setup, so the possibility of it occurring must be allowed. That would also start to qualify as an attempt not only to invalidate last Tuesday’s surge as the start of a new rally leg, but more importantly try to reverse its momentum. There’s not much momentum left to reverse, so a decline won’t drop very far fueled by that motivation alone. The key to starting a new downleg still rests on closing under Friday’s low.
Indicators and internals.
The spread between Monday’s NYSE up and down volume was about 50% greater than the spread between advancing and declining issues. This already obligated Tuesday’s market to reward Monday’s sellers for their relative productivity. MACD & RSI haven’t improved into any of the overnight lows to suggest the low has been touched, let alone that a bottom has yet formed. But the low is being retested now, and technicals should be reviewed when considering the likelihood for a new low to hold.
Tuesday’s opening setup.
The overnight low so far has fulfilled the bias-down target while touching Friday morning’s low, and the two factors produced a 3-1/2 point bounce. A new low under ESm 1363’00 would signal that the bounce had ended and the drop was extending down. Back above 1368’25 would target a retest of Monday’s cash session close. An econ report isn’t due until 30 minutes after the cash session open at 10:00 ET, timing that tends either to accelerate or to reverse any trending already underway. FOMC Minutes is due at 2:00, a report that ordinarily sparks an extraordinary degree of volatility.[/pay]