Trading Plan for 11/21

If Monday’s high is going to hold a retest… then already rallying Wednesday would have been preferable, instead of extending the pullback further down. That extra dip under Tuesday’s low came after the afternoon’s bias environment. And it was largely retraced. Fully rejecting it Thursday before trapping many more sellers — and before refueling buyers much further — would keep alive potential for fresh highs to peak.

Pattern points… (Setups and technicals)[pay]
Wednesday’s reaction to the FOMC Minutes produced an 8-point drop from 1788.50 to 1780.25 during the bias environment. It was retraced by 61.8% up to 1785.75. Bouncing a little higher would have triggered a short-squeeze, but a fresh low was probed instead. Recovering that fresh low and entering the final hour back above 1785.75 would have triggered a short-squeeze, too. But fresh lows were probed instead.

Opting to probe lows instead of recovering… sounds like sellers are in control. Or, is price dropping because of patient buyers?

The last probe of fresh lows was retraced all the way back up to the bias environment’s 1780.25 low. That suggests the interim dip was arbitrary, just noise delaying a recovery. Strong-handed countertrend sponsorship doesn’t arrive that late in the day, so recovering would have been the product of weak hands.

And weak handed buyers aren’t going to produce a new trend high close, which Friday’s new high close required.
[/pay]What’s Next… (Outlook and opportunities)[pay]
None of which means the drop from Monday’s high has ended. It is ready to end, but might first want to retest the oversold RSIs at Wednesday’s 1774.50 low. The drop might first extend down to “lower prior highs” at 1768.50. Exiting Thursday’s open above 1785.50 would start to signal strong-handed buyers had arrived already. [/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.