Trading Plan for 11/18
[pay]Pattern notes.
Monday morning’s initial rally attempt was impressive, as impressive as it could be without buyers actually gaining traction. Much of the time up to 10:15 was spent challenging overnight highs and Friday’s cash session close. But those resistance levels held, with sufficient time remaining to fall back under relevant levels on relevant volume.
Throwing good money after bad, buyers repeated the cycle of attempting the impossible during an irrelevant timing window. When their time and money had reached the end, sellers easily stepped in to regain control with a dive back to session lows.
Monday’s pattern was a smaller representation of the market condition since last Thursday’s momentary new low. Buyers rushing in optimistically to avoid missing a low, too impatient to wait for the proof. Monday’s losses extended down overnight, and now this morning’s open is on-track to gap down sharply. Isn’t it apparent by now that true strength is not determined by the brevity of time spent at a low, or by the speed of its recovery?
There is serious work to be done down here, and lower at last Thursday’s low, and lower at targets required by the past two months’ Triangle patterns. A quick reversal from opening down – or recovering from overnight weakness to open higher – would only delay the inevitable and prolong it. Such rally attempts have been shorter and shallower, so perhaps finally this week will put those attempts aside and get on with the business of bottoming.
Indicators and Internals.
The overnight low so far is ESz 829’25 and its 3-minute RSI was oversold. Its reaction has already bounced back up to prior highs around 838’00 where 1-minute RSI is diverging negatively. The low’s retest is likely because of its oversold RSI, but not required because it occurred overnight. And its retest is likelier so long as tests of the 838’00 area prior highs aren’t recovered.
Tuesday’s opportunities.
Thursday’s “V” bottom around 817’00 always required a retest; no credible rally could begin without getting this done. If today is the day, then we’ll look for the character of that retest to determine whether another impetuous rally attempt will come of it, or not. The attempt would be signaled by the retest forming another “V” that reverses up quickly – its rally would be brief, but steep. A durable bottom might form from a slightly lower and certainly longer test of Thursday’s “V” but an extended break is still possible, and likely.[/pay]