Trading Plan for 10/3

If Tuesday’s late rally was weak-handed buying… then how much weaker was the pre-open buying that reacted down intraday into negative territory? In any case, the stronger hands should be rewarded with a range break by Wednesday’s close.

Pattern points… (Setups and technicals)[pay]
Tuesday’s last hour rallied, from the afternoon’s 1432.25 low up to 1439.75 by the cash session close. Futures extended higher to 1441.75. This allowed the session to close 3-4 points into positive territory, the opposite of what was threatened just one hour earlier.

That was similar in principle to Monday’s selling that never turned negative. Tuesday’s selling did turn negative, but ultimately held positive territory.

Last hour action is sponsored by weak hands. Tuesday’s last hour was clearly the product of buyers, so buyers are weak hands. As with Monday’s close, that keeps alive potential for extending down Wednesday. But like Tuesday, immediately recovering 1443.00 would be likely to trend higher intraday.

Opening just under 1436.00 would be vulnerable to extending down. But thanks to having trended up into the close, gapping down under Tuesday afternoon’s 1432.25 low would trigger a session-long decline.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Tuesday morning’s 1432.00 bias-down signal required a test, since it became “unfinished business below.” Tuesday afternoon’s 1432.25 low doesn’t quite qualify, but we’re not going to consider it being an attraction. Overbought RSIs back up to Monday’s 1451.50 high should be tested next if sellers aren’t regaining control at Wednesday’s 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.