Trading Plan for 10/7

[pay]Pattern notes.
Yesterday’s Trading Plan opened by questioning whether Friday’s drop to new lows was a bottom. The questions is equally appropriate today, but the answer hasn’t really changed – no.

A gap up back above prior lows – back above all of the prior lows that essentially all of yesterday’s price action traded under – would reverse the answer to yes. The gap up need not be today, and probably won’t be since S&Ps are currently 37 points too low. But it can’t be more than 2-3 days past Monday’s plunge that created the prior lows.

Monday afternoon’s short-squeeze might still extend further as a corrective bounce, which would target ESz 1091’00. And noise around the target could fluctuate intraday up to 1110’00. That’s not currently in-play, and its possibility would shrink considerably if 1049’00 gives way as support through any relevant timing window.

Further, the inverted Head & Shoulders at Monday’s bottom requires a retest. The oversold 3-minute RSI at the pattern’s low requires it, too. And although the bottom turned almost perfectly on the intraday decline’s last calculable target of 1009’25, the bigger picture makes a case for 966’00 and 911’00.

Indicators and Internals.
Monday’s internals were of course heavily negative. But the ratios weren’t terribly lopsided to sellers. This suggests that despite the size of yesterday’s decline, sellers have more ammunition available to them.

Tuesday’s opportunities.
This morning’s action will be more challenging than recent days. Yesterday afternoon’s short-squeeze is still being absorbed. That process will butt into anxiousness ahead of this afternoon’s FOMC minutes at 2:00. Trending that isn’t underway early might not appear until the FOMC news. Exits should be planned accordingly.[/pay]