Trading Plan for 10/30

[pay]Pattern notes.
Sellers had two chances to be influential again before Thursday late-afternoon, and the open’s gap up ruled out one of those chances. They missed their second chance when the open’s gap didn’t reverse down. Sellers were marginalized. A late-afternoon bout of excessive optimism finally gave sellers a chance to stretch their legs momentarily.

Now, unless 1057.50-1058.00 fails to hold as support through any relevant timing window, the optimism can still bleed into Friday. And it is optimism. Thursday’s gap up, its immediate follow-through, higher afternoon, no corrective dip… It was a reaction to the four-day drop. A correction. Not accumulation.

Then there is NDX underperformance and the Dow’s outperformance. A similar alignment two weeks ago signaled toppiness. They’re doing it again. It’s not a sell signal, but it does reflect the rally’s temporary nature.

The last hour’s impatient buying was quickly punished by a complete retracement. The impatience was also punished by upsetting the direct path underway up to 1071.00-1072.00. The objective is still in-play, albeit on a less predictable path. Unless 1057.50 fails to hold as support.

Indicators and Internals.
The 1-minute RSI diverged negatively at Thursday’s 1064.00 high. The 3-minute RSI was overbought at the time, and the context should have prevented any substantial pullback. But it didn’t prevent a 5-point drop. The outstanding retest won’t undermine the credibility of a sell signal, but 1064.00 is more likely to be retested first – even if only overnight.

Friday’s opportunities.
The calendar is busy through the open. This being a Friday, the morning’s bias environment is likely to persist into the afternoon. So, failing to hold 1057.50 could resume the decline – as in, fall to new lows for the week. A stronger open could once again marginalize sellers until late-afternoon. [/pay]