Trading Plan for 10/23
[pay]Pattern notes.
Extending Wednesday’s drop Thursday had room to probe a couple of points under 1068.00. Bouncing first had room up to 1088.00. The drop extended down first, and then it bounced up to 1088.00.
But the drop bottomed a couple of points short of 1068.00. Because of that unfinished business below, and for several other reasons, the bounce to 1088.00 should fail. Its first opportunity is at the open. Missing that, its next opportunity wouldn’t appear until the last hour.
Friday afternoon’s rally would have been perfectly predictable had the morning’s drop extended just a couple of points lower. to test 1068.00. It would have been perfectly predictable had it begun prior to probing the lows at all. Perhaps the afternoon rally’s only appropriate characteristic is that it was inappropriately timed – a no-bias rally that also requires the bounce’s retracement.
But there it sits, at the peak of a no-bias rally. The 1088.00 bounce limit is still in the process of being tested, instead of either breaking or being rejected. Friday’s open will need to move aggressively to break free, gapping or spiking beyond support or resistance. Wednesday’s steep drop and Thursday’s recovery don’t make the past week’s range any likelier to break one way or the other. The unfinished business below makes that direction likelier, if not immediately then as a later objective.
Indicators and Internals.
RSIs were both overbought and oversold at key times intraday Thursday. Both buying pressure and selling pressure not only reached extremes repeatedly, but also spent considerable time there. This is not a trending market.
Thursday’s opportunities.
A gap maintained above 1094.50 would be likely to range 3-4 points higher through the noon hour, and possibly through the close. Any lesser opening strength could still attack 1094.50, but probably only to trap longs for fueling another downleg. The least likely scenario is to immediately slide or gap down back to the afternoon rally’s 1081.00 origin. Least likely, that is, but still most appropriate, since the leg’s origin was inappropriately timed, it already fulfilled corrective bounce targets. The only econ report is at 10:00, while the earnings calendar is well underway.[/pay]