Trading Plan for 10/27

[pay]Pattern notes.
“Is it safe, yet?” The movie quote finds its way occasionally into market lexicon, but rarely more appropriately than now. Price action is making an argument that the end is near(in a good way, albeit not quite yet). And now there is an overnight limit down, opening spike down, followed by a session-long rally – despite the weekend’s impending illiquidity. Who’d a thunk it?

Sellers aren’t exploiting the environment to gain new traction. The nearby chart depicts Friday’s close being above Thursday’s low, as was Thursday’s close. Actually, Thursday’s close was positive, so obviously that’s not a determining factor for timing. Nevertheless, it does raise the standard for any new selling pressure that intends not to be brief.

Of course, the argument for a bottom would be much more convincing had Friday’s low actually probed prior lows before recovering. S&P futures large contract did, but only momentarily. Optimism at the low isn’t as damaging as at the high, but it does help to refuel the decline.

The net effect is the Complex Descending Triangle depicted nearby. It doesn’t save the market from printing new lows. But it does help to limit the new lows. Typically that is a 61.8% or 161.8% extension of the Triangle’s middle swing, essentially ESz 789’00 or 667’00. Friday’s close was at 866’00. Any delay in extending the decline would help to refuel sellers.

Indicators and Internals.
The 1-minute RSI reading at Friday’s last-minute lower low was not also lower. But that’s not much of an improvement considering it was also oversold. Intraday that might have elicited a bounce. Unfortunately, the weekend can soften the oversold effect.

Monday’s opportunities.
No econ reports are due. The FOMC meeting begins, but its decision on interest rates won’t come until Wednesday afternoon. Overnight price action will be interesting, and potentially predictive of the day’s direction.[/pay]