Trading Plan for 10/23

If Tuesday’s sellers were strong hands… then reversing the open’s surge would have ended in negative territory. Or, at least, probed negative territory. But the reversal barely probed under the open’s lows. And barely touched Monday’s high. Buyers may be waning, but sellers remain patient.

Pattern points… (Setups and technicals)[pay]
Retracing all of Tuesday morning’s surge from 1754.50 sent a warning that the air is getting thin up here. That didn’t prevent the afternoon from rallying to 1753.00. But notice that the recovery did not accomplish anything the morning had not already produced.

The trend is up until it is not. Meanwhile, the burden of proof on sellers. Sellers gained no traction for Tuesday’s effort. So, reversing momentum down immediately must begin by gapping down.

Even then, gapping down Wednesday only to probe under Tuesday’s 1742.00 low would not signal that sellers have regained control. It might only be a little more proof that buyers are thinning out. Anything short of breaking under Monday’s 1735.00-1736.00 lows could still recover to retest the overbought RSIs at Tuesday’s highs.

I published an update to the bigger picture outlook midday Tuesday, “Social compact, meet vicious circle,” that helps to anticipate whether the rally is ending, or extending.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Not absorbing and reversing the rally Wednesday would allow it to extend to its next higher targets at 1760.25 and potentially 1774.50. Avoiding any higher targets would require rejecting Tuesday’s rally by Wednesday afternoon.[/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.