Trading Plan for 10/11

If the decline can’t find a bottom Thursday… then it better had found a bottom already Wednesday. Extending down almost any lower for almost any longer would drive a nail in the coffin that is the QE3 rejection.

Pattern points… (Setups and technicals)[pay]
Despite extending down once again into an afternoon consolidation, only modest selling developed before the close. To be sure, Wednesday’s consolidation began at the noon hour’s end instead of at its beginning, which is not the same pattern as Monday and Tuesday. But it is still not accumulation.

Closing under 1432.00 suggests the drop is extending to its next major objective attacking 1400.00. A second consecutive lower close Thursday would confirm, and should already be well on its way. Otherwise, closing back above 1433.00 — last week’s lows — would give another upleg another chance. And, similar to extending down, closing above 1433.00 would be likely to close well above 1433.00.

Unfinished business below was left outstanding at 1423.50, with room for noise around it down to 1421.50 to compensate for the delay. Testing it and recovering through Thursday’s open would be bullish, but not likely. Simply gapping up above 1429.00 and extending through 1433.00 would be a more credible rally, despite leaving the unfinished business below.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Jobless Claims is Thursday morning’s only high-profile econ report. Thursday afternoon we’ll discuss the market’s posture ahead of Thursday night’s vice-presidential debate.[/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.