Trading Plan for 10/23

If Monday afternoon’s recovery has legs… then it had better grow them or show them by Tuesday’s open. Otherwise, it will have only served to fatten up the market for attracting new sellers.

Pattern points… (Setups and technicals)[pay]
The setup at Monday’s low produced a bounce targeting the 1422.00 area, which was tested to within 1 tick. Rather than just range there, the balance of the session was either going to resume the decline, or produce fresh session highs. The final futures tick was required to fulfill it, but the morning’s 1430.75 was pierced.

Not closing above the objective means that no higher objective is in-play. Not fulfilling the objective would have been more bullish, although that would have made the pattern suspect.

Opening above 1433.00 Tuesday would suggest the recovery was extending, probably through Wednesday morning, and possibly back to the highs. Meanwhile, sellers don’t gain traction from above 1426.50. It can be tested down to 1425.00 for refueling the recovery. Any lower would signal that Monday’s recovery was all recovered out.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Caterpiller’s (CAT) earnings miss was just one in a string. I theorized earlier Monday that rally out of its negative reaction might encourage a theme that earning misses had been discounted. So, it is interesting to note that Texas Instruments (TXN) warned soon after Monday’s open. It affected the stock negatively, but only a little, while ES firmed up to 1432.50. [/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.