Trading Plan for 11/13

[pay]Pattern notes.
Wednesday’s drop couldn’t have ended without yet another 10-point corrective bounce. The last half-hour’s surge from ESz 848’50 to nearly 860’00 started and ended early enough to allow time for its retracement. Most of it was.  The opening gap down had signaled a session-long decline, vulnerable to narrowing most of the distance back to October’s lows, and sellers did not disappoint.

A smallish bounce has room up to 859’00-861’00 before buyers even start gaining traction for another corrective bounce. The possibility cannot be discounted. In this environment of crashing price and interventionist government, it becomes increasingly likely that some “favorable” news might appear suddenly.

Otherwise, the decline’s momentum remains intact. The gap back down to October 27’s low close around 835’00 could be met overnight. Thursday’s open could gap down to within 3 points of it, then extend lower to 827’25. Although 787’00 would make an ideal low (waiting for its rejection to make an ideal bottom), I will be watching any probe of new lows for signs that selling pressure has been depleted. But my premise will be that any bounce is just that, a bounce, on the way to lower lows.

Indicators and Internals.
I’ve repeated often that the goal of this downleg is to shake out sellers before they had a chance to refuel much and replenish their ranks. Wednesday and Thursday’s steep decline was likely to be followed within 2-3 days by a more sizable move. The wide internal spreads reflect just the sort of wholesale, widespread selling that could make an eventual probe of new lows more easily absorbed and reversed by buyers.

Thursday’s opportunities.
The economic calendar has been sparse this week. It’s busier Thursday, but not much. Jobless Claims at 7:30 will be of importance. But at this stage of the decline, price reaction is more important than data. There is a move underway to test October’s lows, whose test would form a very distributive pattern that all but requires probing lower lows. The lower lows would have a distinct opportunity to produce a bottom, but first things first.[/pay]