Trading Plan for 10/5

A funny thing happened on the way to a 40-point drop… A 47-point surge. The noon hour’s 1097.00 high was rejected enough, and in time, for potential to test 1055.50. The effort ended at 1072.50, after the last hour had begun. A reversal up touched 1119.75. The alleged caused wasn’t even news. And in new condition, it was not worth 47 points.[pay]

Pattern points… (Setups and technicals)
The rally’s 1078.00 trigger was not the product of an accumulation pattern. Rather, there was simply no bearish reason to revisit 1078.00. But when coming off of fresh afternoon lows in the session’s last hour, “no bearish reason” became a presumably “bullish reason.” Whatever it was, something counter-trend was probably afoot, or at least worth taking at stab at being long.

The signal — or anti-signal might be more appropriate — is only directional. In Tuesday’s instance it was more powerful.

Just closing above 1104.50 would have signaled a bigger detour in-play. If extending 15 points further did not already exploit the detour, then its target could be 1135.50 or 1154.00.

The high’s overbought RSIs suggest the market won’t reverse down immediately Wednesday. But it can reverse down immediately after retesting Tuesday’s high. Gapping down back under 1102.00 and 1099.75 would reject the retest, altogether, and retracing the surge’s 1072.50 probably wouldn’t be far behind.

What’s Next… (Outlook and opportunities)
A market that can plunge dozens of points can surge dozens of points. A market that plunges dozens of points and then surges dozens of points can still plunge dozens of points. Or more.

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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.