Trading Plan for 11/19

[pay]Pattern notes.
Tuesday’s pre-open low had required a retest. The cash session finally spiked down to a new low at ESz 824’75 that satisfied this requirement. Before spiking down, the consolidation’s measurements suggested that a new downleg would develop from the low’s retest. But instead the pre-open low’s retest held, reversed up, and eventually recovered back to session highs.

The late surge gained about 33 points into the cash session close around 858’00, and about 11 points more to 869’00 before the Globex open. The cash session close was under the morning’s high, which precluded the session from being considered a Key Reversal. Otherwise, the open’s gap down in a downtrend, new trend low intraday, and positive close would have signaled a rally underway.

The futures session close did qualify the day as a Key Reversal. So, much depends upon whether the futures close is rejected at today’s cash session open. The Globex open gapped down enough to make that case, which is being reinforced by further weakness down to 848’00.

Undermining the case for a Key Reversal doesn’t necessarily mean sellers will regain the traction they lost Tuesday afternoon – traction that requires a sustained break under 847’00-848’00. That won’t be likely back above 858’00, which could extend up quickly to Tuesday’s last-minute 868’00 high, and then higher.

Indicators and Internals.
Overbought 3-minute RSI at Tuesday’s last-minute high came after the cash session close, so its retest is only likely, and not required. The Globex session’s gap down makes the retest less likely, but it will still serve as a magnetic attraction if price can return to within its orbit. The overnight low was just probed, and sustaining a break under it would make the prior session’s high even less likely to be retested.

Wednesday’s opportunities.
CPI and Housing Starts due at 8:30 are being preceded by a last-minute pessimistic dip to a new overnight low. This could be priming the pump for a favorable reaction that restarts yesterday’s late-afternoon surge. If not, and the reaction insstead extends down to new Globex lows under 847’00-848’00 that are maintained through the open, the we’ll look for the decline to resume. Then attention will shift to the FOMC Minutes scheduled for 2:00, and always good for a reaction.

Don’t forget to add your comments to Jen’s “Weekly Q” – this week’s will be posted later today. Also note in the blog’s right-hand column that the SPX/ES Spread will be published daily.[/pay]