Trading Plan for 11/1/11

My “session-long decline” setup… takes two days to form, and rarely triggers when separated by a weekend. Even then, it is less reliable. That didn’t prevent Monday’s session-long decline from absorbing bounces, trending down, printing session lows during the last hour, and ticking down further into and out of the close. The setup has only one more characteristic that we might see Tuesday…

Pattern points… (Setups and technicals)[pay]
Monday’s probe under Thursday’s 1260.50 low is not a rejection of Thursday’s rally. Thursday’s rally began from much lower levels — either from Wednesday’s 1238.00 close, or from Wednesday afternoon’s recovery from 1221.50.

Monday’s 1246.50 futures close is a 61.8% retracement back to 1221.50. Holding it through Tuesday’s close (or rallying) would suggest the drop from Thursday’s high had ended. “Ended,” at least to allow retesting attractions above around 1279.50 and 1289.25.

One challenge to recovering is that a “session-long decline” tends to probe lower lows the following day. And lower lows here would likely test 1238.00–1240.00. Not recovering from so low would find little relevant support above 1210.00.

The alternative path up would be to gap up above Monday afternoon’s 1267.25 high. Gap up 20 points from Monday’s close? Why not! Well, apart from it being very unlikely, Globex has already extended down to 1242.00. Still…

[/pay]What’s Next… (Outlook and opportunities)[pay]
The next Freshman 10 introductory workshop is Wednesday evening at 6pm ET. Whether new to the service, or just looking for a comprehensive refresher, consider joining us then in the chartroom.[/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.