Trading Plan for 10/11

[pay]About that close (How the prior session ended)
Friday’s last half-hour was entered at 1161.00 (circled green). It probed both the morning and noon hour’s 1161.50 and 1162.50 highs (circled red). It tested Thursday’s 1163.75 pre-open high during. And then it dropped back under the 1161.00 origin. This last-minute effort reflects excessive optimism.

Pattern points (And technical influences)
The opening half-hour had formed a triangle around unchanged levels (see nearby chart). Meanwhile, RSI deteriorated. This established that its buyers weren’t the kind to gain traction for their efforts. So, afternoon highs were not the product of accumulation, but a reaction from the mid-morning false break down to 1151.50.

An opportunity to attract new sponsorship was missed by Wednesday’s shallow dip. Thursday’s deeper intraday drop rallied too early, revealing its sponsorship to be weak hands. But overnight and pre-open action had neutralized all unfinished business below. If not declining, the market could only firm back to the range’s upper-end at Thursday’s pre-open high.

Friday’s new high close might be considered a breakout. Mondays rarely confirm Friday breakouts by closing higher. A probe of fresh highs is possible – it’s picky, but Thursday’s pre-open high really should have been probed by at least 2 ticks instead of only 1. Friday’s last-minute trapped buyers created the context that would force an early fresh high to be rejected.

The rally can create new business that protects against a drop – by gapping down, setting a new Globex trend extreme, or by confirming Friday’s breakout. Otherwise, Monday’s open is similar Friday when there was no unfinished business below. Now there is no unfinished business above (apart from that annoyingly shallow retest of Thursday’s pre-open high).

Bottom line (My underlying premise)
Turnabout is fair play, and Monday’s session could easily probe Friday’s lows. The reaction up from its false break reached its potential at the highs. And the closing action trapped weak buyers. Sellers can force a close under prior lows and signal the trend reversing down. If the rally gains new traction instead, then sellers for whatever reason will have failed to exploit another opportunity, and the trend would remain intact. [/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.