Trading Plan for 10/12
[pay]About that close (How the prior session ended)
Monday’s quiet day was working on being “ineffectual optimism” – its gap up had probed prior highs without gaining traction or being rejected. But the last hour broke from 1163.00 to 1157.75. The 30-minute plunge was recovered entirely before futures closed at 1162.25, which was also the recovery’s peak before the cash session closed.
Pattern points (And technical influences)
The plunge’s 1157.75 low coincided with obligatory support from Thursday morning’s high and Friday afternoon’s low. Being just into the last half-hour, the timing was right. And, of course, both 1-minute and 3-minute RSIs were simultaneously oversold.
Oversold RSIs make a drop vulnerable to bouncing. Normally, that bounce is doomed to failure because simultaneously oversold RSIs are the product of strong hands selling. Only weak hands are available to sponsor the bounce.
But Monday was quiet for Columbus Day. The plunge’s sponsorship was strong relative to Monday’s quiet. Tuesday’s normal volume pace care could ignore the product of what passed for strong hands on Monday.
That said, I’m giving a benefit of the doubt to a retest of Monday’s 1157.75 low. After the plunge expended the ineffectual optimism’s pent-up selling pressure, the closing bounce expended any pent-up buying pressure. And the morning’s no-bias environment left unfinished business below, a test of its 1154.50 bias-down signal.
There is no requirement to retest Monday’s 1165.00 highs. But there’s little likelihood of avoiding it, not unless Tuesday’s open were already trying to fulfill Monday’s unfinished business below at 1154.50-1157.75.
Bottom line (My underlying premise)
Bouncing 5 points off the plunge’s low allows it to be retested by 3 points (61.8% of the 5-point bounce) without sellers gaining traction. So, the low’s retest can fulfill the 1154.50 unfinished business and still be only a retest. Assuming it were tested, at all, I’ll look for signs of it either holding, or breaking. Any lower through a relevant timing window might find some obligatory support just below it. But only obligatory support is just below it.[/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.