Trading Plan for 10/8
[pay]Pattern notes.
Wednesday’s session indicated at every turn – or lack thereof – that trending just wasn’t on the agenda. The overnight range was narrower than Tuesday’s cash session, and the morning’s range was narrower than overnight. Now Wednesday afternoon’s range has come in as the narrowest, yet.
The 1051.00-1052.25 area’s influence persisted. Its lower-end resisted the afternoon’s ranging as resistance. Then the area’s upper-end served as support through the close, after a last half-hour surge was stopped cold at 1054.00.
The area’s 1052.25 upper-end was still being tested when the cash session closed. Its recovery would have suggested buyers were gaining traction. Instead, the day ended with buyers expending buying pressure without gaining traction.
Extended narrowing ranges often trend initially in one direction, and then reverse more substantially in the opposite direction. Wednesday’s late surge might not seem like much (there wasn’t much to squeeze) but it got the ball rolling upward. S&Ps firmed further after Alcoa (AA) reacted strongly to its post-close earnings.
A higher high need only probe Tuesday’s prior high to qualify, and not by simply ticking higher. There is potential to 1062.25 in the process. Gapping up could repeat Tuesday’s pattern and extend higher through the morning. An attack on 1062.25 could still be rejected, which would invert Tuesday’s pattern and trend down through the morning.
Indicators and Internals.
RSIs diverged negatively into Wednesday morning’s higher highs that failed and were retraced entirely. The afternoon’s technicals weren’t very vibrant, but that worked to our advantage in looking for a last half-hour surge. Now the early post-close action is already testing Tuesday morning’s 1056.75 high to neutralize its required retest.
Thursday’s opportunities.
The 30-year Treasury auction at 1:00 isn’t an economic report. Given the Dollar’s renewed focus, it could be as meaningful as the pre-open Jobless Claims data. And given the relatively short “extended narrowing range” that is trying to break higher after Wednesday’s close (now touching 1058.75), another narrowly ranging session is unlikely. The open’s sentiment might last past the open, but it could be very different or much more pronounced in the afternoon.[/pay]