Trading Plan for 10/5

[pay]About that close (How the prior session ended)
The bounce potential to 1135.00 was met by a 4-1/2 point rally into and out of the cash session close. The cash session closing equivalent was much lower at 1132.75, which was not a fresh high for the afternoon. In fact, the afternoon had repeatedly probed the lower bounce potential at 1131.25.

Pattern points (And technical influences)
Monday’s 1133.25 overnight low had put into play a test of 1131.25 because of their relationship last Thursday, pivotal low and actual low, respectively. Closing back above both would have robbed sellers of their traction.

Futures did close back above both, but the cash session close was still in the process. Not rejecting this last-minute bounce at Tuesday’s open or before can extend to 1138.00-1139.00.

But the ultimate resolution is still down. And an overnight bounce to 1138.00-1139.00 can be rejected before Tuesday’s open. No bounce is required, and back under 1130.00 would signal another downleg underway. Its initial objective is to retest Monday’s 1127.00 low, whose 1-minute and 3-minute RSIs were oversold.

Bottom line (My underlying premise)
If Monday’s drop did turn the corner, then this distribution pattern forming since last Sunday can unfold very quickly. Its initial objective is 1105.00. Tuesday will be a critical test – not of any particular level, so much as a test of buyers’ resolve. Sponsorship tends to fight hard when its trend is jeopardized, and closing under Monday’s lows Tuesday would all but initiate a significant downleg. [/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.