Trading Plan for 11/2

Did I mention this market doesn’t want to trend? It does want to try, gapping up for the second time in three days, and for the second consecutive Monday. But its buyers are shut down and gain no traction for their efforts. Yet another close in the 1180.00-1182.00 area. Some kind of news coming, apparently… [pay]

Pattern points… (Setups and technicals)
In fact, buyers had gained no traction Friday. They spun their wheels avoiding any reactionary dip during revelations of a terrorism plot. Gapping open without first gaining traction doesn’t invent traction out of thin air.

The lack of traction still could have been compensated enough Monday for at least a morning rally. Either weakness down to 1185.25 from the 1186.25 opening print, or a probe above 1187.00 after most of the opening 15 minutes of volatility had elapsed. But the open’s dip was too shallow, and the surge was too early. The consequence was an unsustainable surge.

More so, the consequence eventually was a reversal into negative territory. Three forces combined to form the low: selling pressure was fulfilled at 1173.75 support (green line), during the last hour when new sponsorship is difficult to generate, while oversold RSIs (circled green) reflected strong hands having expended a lot of selling pressure.

Closing above 1179.50 (highlighted green) robbed sellers of their traction. Monday’s 1173.75 low requires a retest, but closing above 1179.50 made the bounce likely to extend, first. Caveat: Monday afternoon’s bounce may have already borrowed too much from Tuesday’s potential opening bounce. Closing above 1179.50 was bullish, but extending into the futures close at 1183.00 left less pent-up buying pressure.

What’s Next… (Outlook and opportunities)
Extending higher overnight or at Tuesday’s open would likely hold a test of 1186.00 resistance (red line). Gapping up above 1186.00 or spiking through it could trend up to and through 1193.00.

An opening dip that fails to hold 1178.50 support would indicate that Monday’s bounce had borrowed too much buying pressure. It would resume Monday’s slide – initially targeting a retest of Monday’s lows, and then 1166.50. [/pay]

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.