Trading Plan for 10/15

If extreme sentiment greets the new week without recovering… then its sentiment extreme would be much further away. But greeting the new week with extreme sentiment is often a sentiment extreme, as Monday’s gap down proves once again.

Pattern points… (Setups and technicals)[pay]
It took a morning-long consolidation at 1688.00-1691.00 before Sunday night’s gap down to 1681.00-1684.00 was truly rejected. But it was recovered entirely, extending to fresh highs. And extending through the afternoon bias environment to a new session extreme essentially marginalized sellers.

That superpower helped to absorb the knee-jerk reaction to a negative headline that triggered a 4-point plunge to 1700.00. The plunge ended within 3 minutes and recovered to a fresh high at 1706.00. One problem — the knee-jerk reaction down was not recovered in time to enter the final hour above the bias environment’s high. The chink in the armor showed when the fresh high also reacted down through the 3:10-3:20 window. The balance of the session ranged sideways.

The rally off of Wednesday’s low had potential for extending into Tuesday morning, and ranging narrowly Monday afternoon may have been trying to keep enough buying pressure in reserve to make that happen. FFresh highs testing the 1710.00 area need not be rejected, but they would be vulnerable. And rejecting fresh highs testing the 1710.00 area would target Monday’s 1687.00 opening gap, and lower.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The bullish path would first dip to 1696.50-1698.00 and trap shorts to fuel a probe through the 1710.00 area. Rallying first to the 1710.00 area could extend higher, and the burden of proof would still be on sellers, but that vulnerability to reversing down would be no less.[/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.