Trading Plan for 11/10
A session-long decline is rare… rarely is it only a shallow dip. Just as rarely is it a substantial drop. Wednesday’s session-long decline was neither. Most (61.8%) of the drop from Tuesday’s close happened by the open. The rest (38.2%) came intraday.
Pattern points… (Setups and technicals)[pay]
Among a session-long decline setup’s characteristics is its tendency to print the session low during the session’s last hour. Wednesday’s setup failed in this regard. Not just because the last hour’s 1223.50 low stopped 3 ticks short of touching the 1222.75 earlier low — the earlier low actually printed 1223.50 basis SP, so only ES made a higher low.
The ES low did attack 1222.50 to within 1 tick. This level was very relevant last week when the prior downleg was ending. Falling so far and so fast only to narrowly avoid touching this previously productive level reflects optimism. It’s pretty interesting for impatient buying to appear 50 points under of prior close.
That optimism of avoiding a fresh low suggests that lower lows will print by a wide margin. Lower lows to some degree are already likely to print since session-long declines tend to extend down the following day.
Neutralizing the optimism with a sharply lower low could reverse up suddenly since Wednesday afternoon’s corrective bounce was relatively shallow. Testing 1212.50 and 1208.50 — down to at least 1205.00 — could find selling pressure expended. Not that a durable bottom would form, but a durable downleg wouldn’t tolerate much counter-trend bounce.
[/pay]What’s Next… (Outlook and opportunities)[pay]
Closing Wednesday under 1227.25 without yet probing new session lows during the last hour was compelling to consider for a “hold-short through the close.” A counter-trend bounce overnight could reverse down from 1234.50 or 1239.00 and greet Thursday’s open in decline. But bouncing after first probing fresh lows would not be as assured of also reversing down.[/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.