Trading Plan for 10/28
[pay]Pattern notes.
Monday’s last-minute drop covered no new ground, so it was no more relevant than anything already established by previous price action. The peak just before 2:00pm came a little too early, and the acceleration just before 4:00pm came a little too late. Of course, neither too early nor too late to be productive – obviously, since the last-minute drop was 30 or 40 points, depending upon where the measurement begins. But that wasn’t a credible time for lasting opinion to rear its head. And it originated from a triangle that would require its retracement.
The drop has been retraced overnight, back up to ESz 878’50. This is despite initially extending down to 827’25 after the cash session close. Any drop Monday afternoon was going to continue dropping into the session’s last tick. Dropping further does prevent the drop from being considered counter-trend. It also creates fresh price action beyond the intraday range that can help attract price back to it for a retest.
This and other Globex extensions represent much of the attraction to lower prices. It isn’t Friday and Monday’s pre-open price action, twice consecutively threatening a gargantuan intraday drop, yet retracing all or most of the threat. And now Monday’s last-minute drop has been retraced overnight to counter a third threat. Sellers are being absorbed, but momentum is not reversing up, since the intraday rallies are only retracing lost ground but not extending higher. That leaves potential for intraday tests of the Globex extensions at lower prices.
Indicators and Internals.
MACD & RSI didn’t diverge positively simultaneously during Monday’s last-minute decline until after the cash-session close. The 51-point overnight rally from there was productive until a negative divergence at the 4:00am high produced a pullback down to 860’00. The 3-minute RSI was borderline oversold at the pullback’s low, so it isn’t clear whether its retest is likely.
Tuesday’s opportunities.
Currently, there’s a bounce up to 872’50 that has room down to 864’50, where any lower would target 851’25. Otherwise, extending the bounce above 874’00 would put into play 880’00 and higher. Consumer Confidence numbers are due at 10:00am. It’s probably a little too soon for price action to become paralyzed from anxiousness ahead of tomorrow’s FOMC interest rate news.
Two near-complete intraday retracements of overnight gargantuan drops did not trigger a rally. Instead they were followed by Monday’s last-minute gargantuan drop that was retraced Monday night. Clearly they are neutralizing potential opposition in preparation for a better rally effort soon. But if that effort isn’t evident by Tuesday’s open extending the overnight rally to new relative highs, then that would be buyers’ third strike. It would also be their third out, giving sellers another chance at 787’00 where buyers can try taking another swing.[/pay]