Trading Plan for 10/26

Is that a breakout in your pocket, or, oh. Happy to see you, too…  An initially bullish reaction to the weekend’s G20 meeting failed to attract more buyers. It had more than its fair share of optimists (described in Monday’s First Trade). Ineffectual optimism. Gap up, new high, entire session spent in positive territory, but close under prior highs. That’s a lot of buying pressure to expend without gaining traction. [pay]

Pattern points… (Setups and technicals)
Monday’s opening gap (squared red) was within a couple of ticks of Thursday’s prior high, so it did not require being filled. Nevertheless, it was. After dipping back under the prior high, a bounce probed it as resistance. Any attraction above that it might have had was neutralized.

The overnight high’s 1193.00 “new Globex trend extreme” was retested intraday, neutralizing its attraction above. The ~1186.25 prior high (circled green) held as resistance through the close. This signals momentum at least trying to reverse down. Sellers get a benefit of the doubt

It does not signal the trend reversing down, which would now require closing under Thursday afternoon’s 1167.25 prior low (circled red). But unlike the two previous prior lows, buyers did not gain traction during its recovery.

1183.00 either failed as support at the close, or it was still being tested. Regardless, it was its second test, which was suspicious if a recovery were underway. Support at the two “lower prior highs” (highlighted red) is tenuous, at best. Breaking lower would be credible for extending down in that direction.

What’s Next… (Outlook and opportunities)
Monday’s close was a rare opportunity for holding short through the close. That is, the likelihood was greater for gapping down than for gapping up. Buyers had not gained traction for the third consecutive session, and two gaps up had made no net intraday gain.

Weakness overnight or Tuesday morning will try to find support at Friday’s 1179.00 lower prior highs. A break under Friday’s 1176.50 prior lows could snap back – at least once – if the break were not maintained through a relevant timing window.

Getting through Friday’s prior lows would require serious selling pressure, or the absence of serious buying pressure. In either case, the environment would be changing. It probably is already, unless 1188.00 were recovered by and/or through Tuesday 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.