Trading Plan for 10/8
[pay]About that close (How the prior session ended)
Often, afternoon price action is paralyzed by anxiousness ahead of an Employment Situation report. Thursday afternoon had bounce off the noon hour’s 1147.25 low, peaking at 1155.00 just before the bias environment lapsed at 2:30. The cash session ranged sideways narrowly from there. A surge into the futures close on AA earnings touched 1157.25.
Pattern points (And technical influences)
The 1148.50 pullback target was met at Thursday’s lows. Closing above 1154.25-1154.50 could have refueled buyers to resume the rally. It was still being tested at the cash session close, so not clearly recovered. So, no signal that a new upleg is underway.
Anyway, the bounce trended up during a bias-down environment, which strong hands don’t tend to sponsor. The 1146.25 bias-down signal is unfinished business. Also, the 1147.25 low’s oversold RSIs require a retest. A negative knee-jerk reaction to Friday’s Employment Situation report could test these and rally into the open. That could be very bullish.
I would be inclined to sell an initial rally, preferably after retesting Thursday morning’s 1161.50 bias-up signal. Preferably after retesting Thursday’s 1163.75 pre-open high. But there is no requirement to rally at all.
Some move lower at some stage is likely since the recovery setup came so close before failing. A setup that fulfills all of its elements – except for the close – is often a contrary signal. Thursday’s recovery closed too low (or too early). Firming to 1157.25 would have been bullish at the cash session close, not after.
Bottom line (My underlying premise)
An initially positive reaction that sells off sharply was my likely scenario for Friday’s Employment Situation report. So it is interesting that Thursday already followed this path. The weekend’s impending illiquidity factors heavily into that template, and now it actually is impending. Thursday’s pattern either stole Friday’s thunder, or gave it a running start.[/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.