Trading Plan for 11/16

[pay]Pattern notes.
Friday morning’s retest of Thursday afternoon’s 1083.25 low requires no further testing. Although ES E-mini contract stopped 1 tick short of even touching the prior low, the SP pit contract reached 2 ticks lower. And in any case, both dips were a retest of Tuesday’s 1086.25 and 1085.00 prior lows.

So, there’s no requirement to retest Friday’s low. There was no requirement to retest Thursday’s low, but it was retested anyway. One or two tests is all that a market can get away with. Any more is overkill. The question shifts from how big the reaction will be, to why wasn’t the reaction durable?

The support may have been strong to begin with, but one extra retest is still allowable. Friday’s retest, after all, took place on a Friday. Counter-trend sponsorship is difficult to attract when the weekend’s illiquidity is just hours away. Friday’s bounce back up to 1096.00 was respectable, but it was largely retraced. Why, if the low’s support was valid?

This, too, can be dismissed for being a Friday. Any bullish argument requires dismissing the bounce’s brevity and shallowness for being a Friday. And any bullish argument then requires the new week to make up for lost time. A break above Friday’s 1096.00 high would target a retest of Wednesday’s 1103.25 high – actually probing it, since Thursday morning’s surge already retested Wednesday’s high by the proxy of 61.8% retracement.

The alternative is that Monday’s open won’t be making up for lost time and gaining new ground. Then we’ll know that Friday’s redundant retest of the lows was for bearish reasons, and not because of reluctant sponsorship ahead of the weekend. A retest of Friday’s lows would be a formality, and its break a likelihood.

The bigger picture.
A retest of last week’s high would be similar to Thursday’s retest of Tuesday’s lows. Last week’s high was itself a retest of October’s high. Another retest would be similar to Friday’s retest of Thursday’s low. It would border on being overkill. There is significant resistance just above last week’s high at 1105.00-1107.00, and then 10-15 points higher.

Starting out the week on a sour note instead would mean testing Friday’s low. Testing Friday’s low would mean breaking it. And breaking Friday’s low would target a retest of last Monday’s opening gap at 1074.75. That’s pretty significant support. The big gap below it may look inviting, but it’s not, or else it would have been tested already intraday. Closing near the gap would be likely to break lower, but it wouldn’t be a signal.

Obviously, much depends on the $USD, currently trading inversely to S&Ps, almost tick-for-tick. And it is also in a very touchy position.

Indicators and Internals.
RSIs were simultaneously oversold at Friday’s late 1086.25 low, which printed right at 3:00. Several minutes later would have undermined the reading. Thursday’s late low was much later, when its RSIs were also oversold. It was retested. So, a retest of Friday’s late low can’t be discounted, although the weekend does have a way of dulling the influence of a three-day old late-afternoon technical reading.

Monday’s opportunities.
Be sure to note the odd timing of economic reports due out. Monday pre-open is unusual, and two simultaneously is even more disruptive. [/pay]