Trading Plan for 10/8
[pay]Pattern notes.
What a day. It started at ESz 1069’00-1070’00 whose recovery would have stretched Monday’s short-squeeze 20 points higher. It ended at 1000’00 following a 90-minute, 43-point slide into the close. That’s a new low, both intraday and on a closing basis. And it’s the second consecutive day to range entirely under the prior consolidation’s lows.
That second consecutive thing is not just a random observation – it is confirmation of a trend underway. Monday’s second consecutive new low close was a weaker confirmation. Almost unimaginable before now, that S&Ps could be 160 points under three-day old prior highs, and still be confirming a trend in-play.
You’ll read or hear me speak of possible bottoming setups this week, but please keep that in this perspective: A bottom would require ignoring or overwhelming not just one second consecutive thingee, but two consecutive second consecutive thingees. A corrective bounce can be very productive when the prior week peaked 175 points higher. But I’ll expect it to fail, and to fall back down to wherever it originated.
There wasn’t any particularly onerous development along the way. And, yet, down she goes. Whenever the market is trending away from the direction that the news suggests it should or could, the news isn’t necessarily wrong. But the market is always right.
Indicators and Internals.
Improvement in 1-minute and 3-minute RSI at Tuesday’s last-minute low already produced a 10-point bounce after the cash session close. And that has already resolved in a lower low at ESz 998’00 before 8:00pm. Presently there’s a 10-point bounce attacking 1008’00. Only the 1-minute technicals have deteriorated, but the bounce should fail anyway because RSI was oversold at the lower low.
Wednesday’s opportunities.
The round-number-itis of SPX 1000 isn’t as influential as Dow 10,000 because the index isn’t as popular. Tuesday’s patterns that identified the 1000’00 target also included 995’00. I’ll want to see its test, and the oversold RSI neutralized, before consider whether this downleg is pausing again. Otherwise, a gap up would need to recover 1045’00 before being likely to extend higher.[/pay]