Trading Plan for 11/12

Tuesday’s trend change has been both productive… and also not productive. It has stopped the rally and probed lower lows. But it hasn’t yet produced a downleg. Is this the best it can do, or are sellers about to make up for lost time?[pay]

Pattern points… (Setups and technicals)
After testing overnight highs around 1212.75, the door was open to a big drop. Standing in its way was the support of Thursday morning’s highs at 1208.00-1209.00. Its test was the product of a sudden reaction to Disney (DIS) news, and it didn’t gain traction.

There is usually a reason why holding one test of resistance doesn’t resume a decline. It is because the market intends to test a higher resistance, first. The next higher resistance is Wednesday’s 1217.00 high whose overbought RSIs require a retest.

Recovering 1211.75 would have signaled the test underway. But a bounce into the cash session close peaked there. A 2-point drop into the futures close was just retraced to 1211.75, but still no signal.

Thursday’s session traded entirely within Wednesday’s range, making it an “inside day.” Trending up throughout an inside day does not form a solid base for launching a rally leg. Thursday’s gap down already gained traction that undermines any rally prior to probing new lows. Whether from testing 1212.75, 1217.00, or new highs, the bounce is just looking for a high where it can resume the trend change.

Tuesday’s trend change signaled under 1215.00 has now lasted two days without recovering. If the decline does resume, then it should be steep and deep to compensate for the delay. Oversold RSIs at Wednesday’s 1201.75 low were barely attacked Thursday, suggesting the eventual retest will be a downleg with potential to 1193.00 and 1180.00-1182.00.

What’s Next… (Outlook and opportunities)
Aggressively probing 1211.75 overnight – i.e. not just inching through it – would target 1217.00. Extending through it, and then testing 1216.00-1217.00 as support into the open could rally to new highs into the weekend.

1217.00 overnight test can be rejected by opening Friday back under 1213.00. Regardless of whether higher highs were probed overnight, any dip maintained under 1206.00 would resume the decline.

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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.