Trading Plan for 10/13
[pay]About that close (How the prior session ended)
FOMC Minutes had triggered a favorable reaction from 1160.00 to probe fresh highs above 1165.00. It was retraced almost entirely back down to its origin. Anticipation for INTC’s earnings triggered signals targeting 1167.25. It was probed momentarily up to 1169.00, then retraced down to 1164.00 at the futures close.
Pattern points (And technical influences)
The FOMC reaction probed new highs up to 1165.75. This test made it part of Monday’s prior high. Ending the day back at 1165.75 does not qualify as a breakout. So, a higher close Wednesday would not confirm a breakout, as there is no breakout to confirm.
The reaction down from 1165.75 bottomed at 1160.25. Having closed at this leg’s upper-end, opening under its lower-end would equate to a valid breakout not being confirmed.
Despite seeming similar, there is a very specific difference. A breakout can still be re-attempted two days later, if the interim day failed to close higher and confirm it. “Try, try again,” as they say. But a breakout attempt invalidated at the close barely reflects a try. More dangerously, it reflects shallow sponsorship. And that would only be confirmed by breaking back under the failed breakout’s origin.
Coming into Tuesday’s session, there was no unfinished business above to attract price higher. But the unfinished business below was likely to hold as the lower-end of a brief range. Now there is also a hint at why there isn’t any unfinished business above, and the answer could be that buyers are done. Buyers are better off to refuel with a shallower dip.
Bottom line (My underlying premise)
This stage of the market cannot simply range sideways – it must extend higher without delay to avoid a new downleg. Under 1160.00-1161.00 puts into play a retest of Tuesday’s 1151.75 low. And that was an obligatory low, whose oversold RSIs require a retest. Having probed new highs since then, the only reason for returning to the interim low would be to reverse the trend down. [/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.