Trading Plan for 10/24

If Wednesday’s gap down was bearish… then why didn’t it extend down any lower? It wasn’t for lack of trying. And buyers didn’t exploit the weak sponsorship by rallying. But the drop still leaves the burden of proof on sellers, which can be bullish..

Pattern points… (Setups and technicals)[pay]
Tuesday night’s slide really did a number on optimism. But it wasn’t a death-blow. Obviously, not extending down Wednesday is one clue. Still, that’s not the decisive point. This might sound odd at first: Wednesday’s sharply lower price was more bullish than bearish.

Tuesday night’s drop probed well under Monday’s highs. Maintaining or repeating that probe through the open would have reversed the trend down. But even a post-open probe of lower lows could not maintain the pressure through a relevant timing window. Neither could a later dip.

Wednesday morning’s 1741.00 bias-down signal never recovered intraday, so buyers never failed in any effort to gain traction — they never tried to regain traction. Closing under Monday’s 1742.50 “lower prior highs” does keep the door open to extending down Thursday. But sellers failed to extend down despite the one-sided fight, so Thursday’s open will need to gap down if the drop intends to extend.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Post-open action just gapped up to 1743.00, as if the afternoon’s restraint has been lifted. There’s a whole night ahead, but extending through Wednesday morning’s 1744.00 high could be very bullish.[/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.