Trading Plan for 10/29
[pay]Pattern notes.
Good news / bad news: The potential for a 20-point corrective bounce off of the 1051.00-1054.00 target is now 34 points. Its 1072.00 target hasn’t changed, but now it would begin from 1038.00.
The point is that despite Wednesday’s steep drop to sharply lower lows, the potential for a corrective bounce remains alive. “Alive” is a far cry from being triggered, but at least it still has a pulse.
Even after Wednesday’s close, financial media in search of explanations is starting to ask whether the Tech rally is no more. That’s a good question, but NDX answered it two weeks ago. Selling has been ongoing since then.
Only now is everyone taking notice, because it had already become widely recognized. This situation always cuts one of two ways: Either the story is thoroughly disseminated and fully discounted to allow a near-term bounce, or else the decline extends down sharply.
It’s still a tough balancing act not to stay bearish for too long, and not to get bullish too soon. Meanwhile, the trend remains down until it proves otherwise.
Indicators and Internals.
3-minute RSI was freakishly reticent to touch either overbought or oversold extreme. That was for the ES mini. The SP contract somehow did register oversold before diverging positively into the close. But only by a little. And although it had gotten late enough to reflect real opinion, it didn’t rise to the quality of being a buy signal.
Thursday’s opportunities.
The next lower target under 1051.00-1054.00 was essentially 1042.00. This lower target was met during Wednesday’s last hour, and probed a little, but not broken until the last half-hour. The timing isn’t necessarily criminal, but it is always suspicious. The last hour’s first test of 1042.00 reacted up to 1044.00. So, gapping open above it Thursday would trap the culprit. Potential corrective bounce targets would be 1051.00 and 1072.00.
However, Thursday’s likeliest opening scenario is to extend the decline. One method is to gap down under 1036.50, perhaps all the way down to 1027.00-1028.00, along the road to testing the 1023.00 area. Alternatively, opening strength that doesn’t recover 1044.00 could trigger massive disappointment, and a mass exodus.
GDP and Jobless Claims lead the calendar. That may be the least of it, if GDP doesn’t make the most of it.[/pay]