Trading Plan for 10/7

About that close (How the prior session ended)
A bounce back to the afternoon’s 1154.25 bias-down signal was barely attacking it as resistance at 2:30. Recovering 1155.50 would have confirmed, but that wasn’t touched until 10 minutes before the cash session close, while 1-minute RSI diverged negatively. It was probed after the cash session close, too late to gain traction

Pattern points (And technical influences)
1154.25 could have been recovered by 1:30 or through 2:30 to invalidate the afternoon’s bias-down signal. Bouncing into 2:30 could have qualified by recovering 1154.25 through 3:00. But neither recovered in a timely fashion. Wednesday afternoon’s 1148.50 bias-down target is now “unfinished business”.

1154.25 was recovered at the close, too late to invalidate the bias-down. Dropping overnight first back under 1153.00 would suggest a move is underway to 1148.50. But if sellers haven’t retaken control aggressively by Thursday’s open, then it’s probably because a detour bounce is already underway.

A detour bounce’s target would be Wednesday morning’s 1161.00 bias-up target, and above 1161.00 would target 1164.25–1165.00. An overnight test would suffice – which would be important if the open is already dropping after pre-open news surprises negatively.

Sponsorship for a new upleg isn’t likely without dipping deeper, first. Retesting the highs first would stretch buyers more thinly – perhaps a case of “buy the rumor, sell the news.” Thursday’s reactions will help to fine-tune expectations for Friday.

Bottom line (My underlying premise)
So much common anticipation for a single outcome is groupthink, and it accompanies a trend’s end. Not its beginning. Opinion is still divided among whether the market is fully, fairly or under valued. But there is little disagreement regarding the events to come: QE2, not-so-bad Employment Situation report, Congressional control. By the time one or two resolve, price has already discounted much or all. And the first of these tests comes Friday.

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.