Trading Plan for 10/4
[pay]About that close (How the prior session ended)
Despite higher highs and higher lows throughout, Friday afternoon really only ranged around the noon hour’s 1141.25 high. Its eventual touch of 1144.00 reacted down to 1140.00. Buying pressure that gains no traction is “ineffectual optimism.”
Pattern points (And technical influences)
Volatility comes in pairs. Either two or more timing windows contain a wild swing or sharp trending, or else all timing windows range quietly. Fridays can delay round-two by sucking volume out of the market. Not yet having matched Friday morning’s swing, Monday’s open is unusually vulnerable to a wild swing or sharp trending.
It would be interesting if Monday’s volatility were similar to Friday’s, which was similar to Thursday’s. Note in the following chart how early rallies (circled red) have been more aggressive, so therefore more easily absorbed. Yet each of the past three sessions have attacked 1136.00 (highlighted green) during inappropriate timing windows, when sellers were unlikely to gain traction.
Since Friday repeated the ongoing pattern of not closing under a prior low, the trend has not yet signaled it is reversing down. So, Monday is vulnerable to another early rally, which would neutralize the overbought RSIs at Friday’s 1146.50 opening tick. Immediately rejecting its test would find little support from Friday afternoon’s ineffectual optimism (highlighted red).
Perhaps Friday afternoon’s ineffectual pessimism is Monday’s early rally, or an actual rally Sunday night will fail before Monday’s open. Gapping down under 1138.00 would reject all of Friday afternoon’s improvement.
Bottom line (My underlying premise)
Monday’s don’t often trigger a “session-long decline” (or rally) setup, and anyway Friday’s closing action itself didn’t actually trend up. But some aggressive follow-through to the downside would still be likely. Monday’s also don’t often start a durable breakout, but that doesn’t stop them from trying.[/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.