Trading Plan for 10/22
[pay]Pattern notes.
In the charting room Tuesday, I attributed a quote incorrectly to Doyle Brunson, that actually came from Tom McEvoy describing poker as “Hours of boredom followed by moments of sheer terror.” And that’s when it is played properly.
Tuesday’s price action provoked me to recall the poker quote. The open’s gap down, the late-morning 32-point drop whose afternoon recovery was retraced entirely again. Waiting for each of those setups was in turns either frustrating or dull. But when buyers or sellers caught, they caught, and price moved.
But even after all of its unique twists and turns, Tuesday’s session was more similar to Monday than different. Neither filled its opening gap, nor did they extend beyond the prior session’s range despite trading exclusively in positive or negative territory. Two consecutive inside days is no more revealing than one.
Sellers still seem to have the advantage, not of day-to-day or intraday control, but for preventing a rally for 2-3 days since last Thursday’s low. Friday’s session had extended sharply higher intraday and yet its afternoon reversed down to close negative. That afternoon’s loss was recovered Monday, and then largely reversed again Tuesday.
That said, no advantage is meaningful if never exploited. While S&Ps consolidates atop a bounce without retracing it, the burden of proof is on sellers. Their clock is ticking down, and opening only slightly weaker Wednesday won’t buy them any more time. Significant selling pressure should appear without delay, or else be delayed until S&Ps rally another hundred points.
Indicators and Internals.
Internal spreads were much less lopsided after Tuesday’s choppiness than after Monday’s session-long rally. Sellers aren’t nearly as expended now as buyers were before Tuesday’s open. Internals were lopsided enough to suggest a momentary bounce was due, but that might have been satisfied overnight by the initial earnings reaction.
Wednesday’s opportunities.
The econ calendar is very much muted for the balance of the week. Thursday’s Jobless Claims and Friday’s home sales aren’t going to compete well against earnings news. Which might be bad news for stocks, because even the decent earnings news items haven’t had much favorable impact. Every bounce should be considered for its vulnerability to failing, and to producing a gap down well under ESz 950’00 that extends down sharply through the day.[/pay]