Trading Plan for 10/15
[pay]Pattern notes.
Optimism was thick after Tuesday night’s Globex surge. It was thicker, yet, at Wednesday morning’s open. But the session was likely to trend in one direction or the other, and not trending down was likely by default to trend up. The intraday trending extended higher into the last half-hour.
Does that mean the optimism was absorbed? Not by a big dip, or by extended ranging. If Wednesday’s session rallied despite optimism already being extreme, then the optimism has only gotten more extreme.
We already knew this leg was sponsored by extreme optimism since it originated from Tuesday morning’s oversold RSIs. Since Tuesday’s post-close reaction to INTC fed off that optimism, it’s not surprising that Wednesday afternoon’s surge did so, too.
This template I just described tends to extend the optimistic trending. Regardless of whether the opening tick itself gaps up or gaps down, the uptrend should resume through the morning, targeting 1096.00. Sellers aren’t required to retake control after that, but the possibility would arise because buyers aren’t required past then to maintain it. And optimism would be stretched pretty thinly by then. Extending the rally higher anyway would next target 1114.00-1117.00.
If the trend isn’t persisting through Thursday’s open, then sellers are probably already retaking control. The morning would be just as likely to trend, but down. The earliest warning would be the open either falling hard from a test of the 1091.00 area or else gapping under 1082.00-1084.00. The least likely bearish scenario that is nonetheless possible would be to gap down under 1069.00-1072.00 so Wednesday’s resulting Island would drive price down sharply. Possible. And least likely.
Indicators and Internals.
RSIs were overbought during the formation of Wednesday’s late high. That was during the session’s last half-hour, which can render technicals irrelevant, and sometimes even contrary. So there is no technical requirement to retest the high.
Thursday’s opportunities.
Read my comments here atop tomorrow’s econ calendar, which should help to promote an unusually volatile morning. Earnings include more banks and techs, leadership and bellwethers. Among the higher-profile is C and GS… IBM and NOK… AMD, CY and FCS… MRK and BAX… GOOG and HOG. There’s a lot of news to navigate. The technicals at relevant price points described above will guide the morning’s path. But the afternoon’s motives won’t be revealed until knowing what of the morning’s objectives were fulfilled. [/pay]