Trading Plan for 10/1
[pay]Pattern notes.
Tuesday morning’s bearish opening plunge had predicted a bigger downleg to follow. Shock waves from that morning’s volatility needed the entire day to be absorbed. Wednesday’s open didn’t wait long to produce its own plunge, and its own shock waves. Tuesday’s shock waves were absorbed by ranging sideways. Wednesday’s method was to retrace the morning’ entire drop.
The drop was retraced with plenty of time remaining for the bounce to extend into a recovery. It still might, if Thursday’s open maintains a gap open above 1058.00. Follow-through back into the mid-1060‘s might not extend far intraday, but it would probably marginalize sellers until 1072.00 was retested.
Weak firming at Thursday’s open would more likely hold a test of 1058.00 and then reverse down to 1048.00. Its break at any time – with or without first bouncing – would trigger the next downleg. A drop has room down to the 1040.00 area, basically a retest of Wednesday morning’s low. It shouldn’t produce an obligatory bounce, since that’s what Wednesday’s bounce was. So, any lower would confirm the next downleg is underway.
A close under 1046.25 Wednesday would have made it clear that sellers retained control. Closing under 1052.25 still makes the argument, so long as Thursday’s open doesn’t gap up. If the decline does resume Thursday, it might not be very productive until Friday, just in time for the Employment Situation Report.
Indicators and Internals.
RSIs were oversold at Wednesday morning’s 1041.50 low, requiring its eventual retest. RSIs were overbought at Wednesday afternoon’s 1059.25 high. The latter’s retest isn’t required, because it was the product of a surge between the noon hour and the 1:20 bias timing window. But its retest would be likely if 1058.00 were attacked. RSIs were oversold again at Wednesday’s 1047.00 last-hour low, making its retest much more of a requirement.
Thursday’s opportunities.
The econ calendar is busy, busy, busy. Its items are high-profile, and their timing is almost intended to incite volatility. Parameters are described above. Any initial trending can’t be taken for granted. The afternoon may slow ahead of Friday morning’s Employment Situation report, but that would depend upon how the morning shook out. No pun intended.[/pay]