Trading Plan for 10/14

If you want to learn how “lower prior highs” and “prior lows” can influence price action… then be sure to watch the Market Wrap recording from Monday”s close.

Pattern points… (Setups and technicals)
Friday and Monday both recovered from probing negative territory, all the way through the afternoon”s bias environment. Similarities didn”t end there. The same traction inputs triggered Monday afternoon as did Friday — including the 3:10-3:20 timing windows. And they produced the same last hour relentless slide. 

But their similarities were different in one very important way: One was Friday, and the other was Monday. That is to say, only one sell-off was encouraged by the impending two days of illiquidity. The other sell-off feared something else. The sky collapsing?

Sort of. This is expiration week, which can give new meaning to illiquidity — for those who are on the wrong side of the market. Too long is too long is too long. The impending expiration isn”t causing pessimism, but causing participants to quickly discount the pessimism.

At least expiration is a specific event. Its end may be a catalyst for ending the decline. There”s nothing bullish about that in the near-term. Recall that the Friday preceding Black Monday 1987 was expiration.

What”s Next… (Outlook and opportunities)
Friday and Monday afternoon”s towel-throwing is ready to branch out from being an afternoon hobby. Unrelated is the three consecutive substantial downdays on Thursday, Friday AND Monday, a sequence that tends to extend considerably without delay. If not, then any interim bounce will be considered only a temporary correction.