Trading Plan for 11/11

Wednesday tried to dodge the bullet of Tuesday’s trend change… But it was still grazed. That’s not enough to invalidate the signal, so the decline is now free to resume. With a vengeance, to compensate for the delay. [pay]

Pattern points… (Setups and technicals)
Tuesday’s break under the 1215.00 prior low had signaled a trend change. Its confirmation required only that 1215.00 not be recovered through Wednesday’s close. Wednesday’s close – in fact, Wednesday’s last two hours – ranged narrowly around 1215.00.

That wasn’t enough to invalidate the signal. Therefore, it qualifies as confirming the trend has reversed down. The requirement to retest overbought RSIs at the afternoon’s 1217.00 high might delay the decline’s resumption. Its attraction would be negated by gapping down under the afternoon’s 1205.75 bias-down signal.

That’s interesting, because reaction to CSCO’s earnings drove S&Ps down to 1206.00 after the close. Oversold RSIs at Wednesday’s 1201.75 low require a retest. The detour and delay – sizable, through multiple timing windows – suggests it will be retested by a new downleg (NQ’s heavy exposure to CSCO already fell under Wednesday’s low.)

All of which assumes the market is ready to trend. Tuesday afternoon’s bias environment was entered with a bounce to 1214.50. It was still being tested at every major checkpoint – 2:30, 3:00, 3:30, and the close. It’s similar to Monday’s repeated attraction to 1218.75, which sabotaged Tuesday morning’s rally attempt.

What’s Next… (Outlook and opportunities)
Retesting Wednesday’s low down to 1199.00 could still hold as support. A recovery to new highs would be possible. Otherwise, breaking lower would next target 1193.00 and then 1180.00-1182.00.

Tuesday’s trend change could still be invalidated, by gapping up above 1220.75. That seemed much more attainable at Wednesday’s 1216.00 close, and less so 10 points lower. But now just opening above Wednesday afternoon’s 1212.75 bias-up signal could marginalize sellers for the morning.[/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.