Trading Plan for 10/13

[pay]Pattern notes.
Friday’s early spike down to ESz 837’00 was quickly reversed up to 922’00. My warning then is the same as now: The action speaks to elasticity, not direction. Rather than proving that sellers could be absorbed, the big swing proved only that the market is vulnerable to big swings. Two more big swings followed, this time reaching 943’00.

What did the buyers of these big swings accomplish? They did chip away at the overnight resistance around 922’00. And they chipped away at the decline’s 911’00 target that was fulfilled at Thursday’s lows. But despite these probes above the resistance of prior highs and prior lows – despite how far and despite how aggressively – the resistance held as resistance at the close (on both cash and futures, shows on the nearby charts).

Indeed the close was under Thursday’s late low by the narrowest margin possible without buyers actually gaining traction. Perhaps that is because Friday’s 837’00 low still requires a retest. Perhaps it is because Friday’s negative close kept alive the 10-day sequence I described in Friday’s Trading Plan, fulfilling the crash template. The late dip did make the closing 15 minutes match the open’s 15 minutes – the Friday Factor now expects Monday’s first 15 minutes to also trend down.

Indicators and Internals.
The 1-minute RSI reached oversold at the last-minute low. But the 3-minute RSI at the late high didn’t leave any requirement to be retested.

Monday’s opportunities.
There is no requirement to retest either of Friday’s intraday highs. Doing so would be motivated by some other factor. I would give such strength a benefit of the doubt for being able to extend higher – especially if it meant gapping up above Friday’s 943’00 high – unless something else has appeared to suggest otherwise. There is room up to 909’00 without beginning to signal that buyers are gaining traction.

But just having closed under 893’00 means sellers are currently in control, targeting at least the 867’00 area on the next downleg. The pattern remains vulnerable to fulfilling the required retest of Friday’s 837’00 low, not to mention the crash template. The Columbus Day holiday is an unknown factor in this environment.[/pay]