Trading Plan for 11/20
[pay]Pattern notes.
We’re getting closer. To what, I don’t know. But we’re definitely getting closer. Thursday’s “V” bottom had required a retest, and Wednesday’s close was under it . Two “V” bottoms do not make a durable bottom, so an immediate rally overnight or at the open would be expected to fail from whatever heights it could reach. A bounce up to only ESz 816’50 or 821’75 would remain vulnerable to reversing down hard. Any higher would only provide another heartbreaking detour.
The near-term objective is to test lower lows down to ESz 787’00, and then hold. This area would satisfy sufficient selling pressure for a false break from the multi-week Descending Triangle. Short and shallow bounces would confirm that sellers had been flushed out. This sort of thing doesn’t form in a day or two.
If the next lower low is not going to start forming the low, then it is not going to hold very well at all. An optimistic bounce to refuel sellers wouldn’t even be on the menu. Instead there would be a capitulation leg worthy of a new label. And it would likely start by gapping down sharply.
Wednesday’s close barely recovered above the 811’00 level that would have otherwise allowed for holding short without interruption. No matter. Globex gapped down to reject Wednesday’s last-tick recovery, and after bouncing to 813’00 there are new session lows testing 807’50. Another point lower would start looking ugly for tomorrow’s open.
Indicators and Internals.
MACD & RSI diverged positively repeatedly throughout Wednesday’s decline, suggesting that much bigger selling pressure was visible. And much bigger selling pressure arrived by the close. But I wonder. The 3-minute made higher lows along with the 1-minute, but not diverging positively, since the 3-minute never became oversold during the afternoon. If sellers barely broke a sweat, there may be much more selling pressure coming down the pipeline.
Thursday’s opportunities.
A big gap down Thursday might elicit yet another knee-jerk reaction, but the open’s gap would need to be filled. An overnight rally would need to produced a sizable gap up to avoid probing lower lows. Perhaps this is the new low that doesn’t immediately originate a new rally attempt. Econ reports at 8:30 and 10:00 might impact price action, but probably without influencing direction.[/pay]