Trading Plan for 10/20
[pay]Pattern notes.
That was quite a party Monday morning. The 19-1/2 point up-crash seemed to be this market’s way of recognizing the anniversary of 1987’s Black Monday. Perhaps the sudden 5-point dive through the cash session close was an homage, albeit on a smaller 1:100 scale. Maybe there are bigger plans for something impressive on next Thursday’s anniversary of Black Tuesday.
Regardless, the morning’s rally fulfilled targets, and the afternoon’s narrow ranging around its 1096.00 target reflected optimism. High-profile earnings (AAPL, etc.) due after the close was an opportunity for robbing the morning’s rally of its traction. What’s interesting is that it didn’t rob the morning’s rally of any gains. The session ranged sideways narrowly from noon and on, probing highs more than hesitating there.
No unfinished business above was left outstanding, but there will be. In other words, Monday’s close is above prior highs, and anything but a flat open would create a gap back to Monday’s close that wants to be filled. That’s intraday. On a closing basis, despite leaving no target outstanding, tests of existing targets weren’t rejected. However much traction buyers might have lost into Monday’s close, sellers didn’t gain any.
Indicators and Internals.
There was no business left outstanding Monday. All intraday signals were fulfilled. RSIs did get oversold on the post-close dive’s low, but the setup was too late to doom a bounce to failure. Anyway, the Globex open’s initial weakness probed that low, and diverged positively. That produced a 6-1/2 point bounce, without RSIs becoming overbought. Nothing helpful there for the rally.
Tuesday’s opportunities.
Only futures reacted down from 1096.00 to close back under Thursday’s 1092.00-1093.00 high. The initial reaction to earnings was positive, sending S&Ps almost immediately back up to 1096.00 (no new high) while NDX finally probed last week’s highs. If the gains stand up overnight, then the gap back to the futures close will try to attract price back down.
So long as S&Ps don’t gap open at higher highs, sellers could regain control by trading down through the open. If NDX futures exceed their initial 1773.50 peak, then S&Ps are probably exceeding 1096.00, and action at NDX 1782.00 can be monitored to discern whether something more durable is underway. S&Ps aren’t required to probe the 1100’s, but 1106.00 would be targeted next.
The econ calendar isn’t benign, and several bigger banks release earnings pre-open. We viewed three of the past four opens as buying opportunities. Without significant improvement from here overnight, Tuesday won’t be a fourth. [/pay]