Trading Plan for 10/31
[pay]Pattern notes.
What to make of Thursday’s roller coaster ride? Not that the analogy is unique lately. But this session cycled much more cleanly than most in moving from one end of the extreme back to the other end. The mood got started with Wednesday’s last-hour round trip, continued with Thursday morning’s complete retracement of the overnight recovery, a recovery that was repeated into Thursday’s close. The pattern stayed true to its roller coaster model by including a couple of false moves in between others.
In the end, Thursday was an inside day whose range was contained entirely by Wednesday’s price action. Had the late-afternoon 22-point drop from ESz 957’00 stayed down, then the session’s pessimistic bias could have been considered contrary to the market’s true motives. But the drop to 935’00 was retraced 30 points including a very last minute spike. So not only was the final bias optimistic, it was optimistic with a vengeance.
The late-afternoon drop interrupted the roller coaster’s early-afternoon rally. Before then, S&Ps were on-track to break above 957’00, with time to extend higher and avoid the inside day label. Then the optimism would have been effectual. The last-minute spike’s slope above 957’00 actually underscores the ineffectual optimism, which can be offset only by maintaining a gapping up Friday above prior highs.
Indicators and Internals.
RSI ranged widely overnight ahead of Thursday’s session, predicting trending and volatility, and delivering. Now the 3-minute RSI is avoiding oversold territory while S&Ps drop at the overnight open. Any trending intraday will be tough to reverse if it ever gets started.
Friday’s opportunities.
It’s not surprising to find three hours into the overnight Globex session an 11-point pullback is testing 950’00 as support. There’s room down to 945’00 before starting to signal that sellers are actually gaining traction, and not just correcting Thursday’s last-minute surge. This being a Friday, the open sequence’s eventual direction, if any, is likely to persist well past the noon hour. But, oh, that opening sequence. Two reports due at 8:30 are followed by two at 9:45 and at 10:00. Even a gap up above prior highs can’t be relied upon to hold its gain and signal a rally.[/pay]