Trading Plan for 10/3

[pay]Pattern notes.
An sort of inverted Head & Shoulders formed into Thursday’s close. A post-close surge met and held the pattern’s corrective bounce target at ESz 1124’75. The buying pressure was neutralized. There are repeated examples of excess optimism on the way down. And there is no unfinished business above.

There is, however, unfinished business below. It is Monday’s post-close “new Globex trend extreme” at 1112’00. Thursday’s sell-off could have taken care of that if buyers had been more patient. Instead their optimism prevented even Monday’s intraday lows from being retested.

Sellers might still be marginalized if Friday’s open were to maintain a recovery above the 1130’00 area. Sellers might become expended if a dip under 1118’00 recovers back above 1126’00. Whatever might happen, there can be no durable bottom without recovering from a test of 1112’00, and a test of 1112’00 isn’t required to recover.

Indicators and Internals.
1-minute RSI diverged negatively into the post-close surge that fulfilled buying pressure. That was again one of the very few technical extreme readings. The 3-min RSI never again became overbought or oversold after 11:00am. The complacency doesn’t help trending to reverse.

Friday’s opportunities.
Hanging over this market is the House vote on the bailout package, and that second chance doesn’t seem to be holding the market together. First comes the Employment Situation report at 8:30 and then the ISM Survey at 10:00. This could affect anticipation for a rate cut that is rumored under consideration to spur the economy. Before all that is a little debate, and its outcome might be the most predictable of all ;)[/pay]