Trading Plan for 10/30

If the rally”s target were not met before the FOMC news… then its reaction probably would have been bullish. But there being no unfinished business above — at least, not a target to fulfill buying pressure — nothing would require recovering from a negative knee-jerk reaction.

Pattern points… (Setups and technicals)
So, the negative knee-jerk reaction didn”t recover. Here”s something else it didn”t do: extend down. Perhaps the 24-point decline had fully discounted the news. 

Whatever the reason, the knee-jerk reaction”s 1965.50 low held several tests as support. One of those tests triggered a sell signal that attracted new sponsorship (extending deeper than its first 3 minutes). The deeper dip wasn”t very deep at all before bouncing, but it still marginalized sellers. 

Not that buyers exploited it. Not right away, not very much, and not for very long. Rallying 14 points from 1964.00 up to 1978.50 may seem like a lot, but only 2-1/2 points of that was above the knee-jerk reaction”s origin. And the bounce lasted only a half-hour. Then it retraced 61.8%.

Sellers gained no traction for their efforts, i.e. Wednesday”s sponsorship was fully satisfied by the decline it did produce. And despite being well-positioned, closing back under 1963.50 was avoided, which would have put into play much lower lows.

What”s Next… (Outlook and opportunities)
Overbought RSIs at Wednesday”s 1985.75 require a retest, regardless of their being created while fulfilling a target. The wide swings at Wednesday”s lows create a lot of buying pressure that can easily retrace back to Wednesday”s high. But gapping down Thursday would suggest the reversal down was extending, and extending.