Trading Plan for 10/29

If downlegs only occur when all upside targets are met… then there would never be any downlegs. There is always potential for extending valuations and for indicators to create new extremes. None of which is a timing indicator. Although, a lot of bearish readings have been getting a lot of attention.

Pattern points… (Setups and technicals)[pay]
Monday’s probe of new highs didn’t extend too much higher, and it fought off two or three downdrafts, beginning overnight. The recovery’s were impressive, but a lot of energy was expended just to avoid dipping into negative territory — at least, too deeply or for too long.

The energy was productive, producing a new high close 4 points above Friday’s 1755.00 high. The morning’s 1760.25 bias-up target was essentially fulfilled, but the 1762.25 overnight high’s “new Globex trend extreme” was left outstanding. It requires an intraday retest, but not necessarily immediately.

Meanwhile, a lot of selling pressure was absorbed intraday, and it was rewarded with a new high close. But that new high close was under the morning’s high, and the last timing window was still testing Friday’s highs as support. It’s not a sell signal, but the uptrend continues to show signs of waning.

[/pay]What’s Next… (Outlook and opportunities)[pay]
A lot of bearish indicators and valuations have been appearing, all based on historical measurements. And they may all be valid. It’s the sort of widespread bearishness that would be a classic contrarian buy signal — if the market had been declining for a couple of weeks. These are just a bunch of contrarians — not necessarily wrong, and perhaps eventually right. But we’re interested in the windows in between… DON’T FORGET: There is no Market Tour or First Trade blog post Tuesday morning, and I hope to be at the screen in time for the open.[/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.