Trading Plan for 10/16

If the rally had potential into Tuesday morning… then was any unfinished business above left outstanding after mostly trading negative Tuesday morning? Almost, but no. The gap down was recovered just enough to momentarily pierce Monday’s high before the afternoon reversed down more deeply.

Pattern points… (Setups and technicals)[pay]
Declining is not the opposite of rallying. Not rallying is the opposite of rallying. So, even if we were 100% assured that the rally did peak Tuesday, that doesn’t require momentum to reverse down. It might, but not because the upleg ended. Another upleg could still begin.

Not immediately, though. So, immediately retesting Tuesday’s 1706.50 high would be unlikely to extend the rally. That opportunity was missed by not already closing higher Tuesday. But a retest of Monday night’s high in the 1710.00 area could be tested while forming a top.

Tuesday afternoon’s slide back down to 1692.00 was presumably on its way to retesting the 1690.00 session lows (to fulfill the Pivotal Uptrending Support break, described in detail on the Market Wrap recording). That hasn’t prevented a post-close surge to 1697.50, reacting to another headline… of course.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Tuesday’s closing action trended down, so gapping up Wednesday above Tuesday afternoon’s 1701.75 bias environment high would form a “session-long rally” setup. Just recovering the last hour’s 1699.25 high would rob sellers of their traction, and either setup would have potential to retest Tuesday’s highs. But extending Tuesday afternoon’s decline through Wednesday’s open could retrace much of the past week’s rally quickly.[/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.