Trading Plan for 11/23

[pay]Pattern notes.
Friday’s open gapped down, spent the entire session in negative territory, and probed Thursday’s prior low. That’s pessimism. But Friday’s session recovered to end back above Thursday’s close. That’s ineffectual. Ineffectual pessimism… where have we heard that one before? Oh, right, from me, last Tuesday and Wednesday. Will this instance be any less ineffectual?

Monday’s gap up had already fulfilled buying pressure up to the 1105.00-1107.00 target. But sellers don’t automatically gain traction when buyers lose it. Both Tuesday and Wednesday’s ineffectual pessimism sessions were still in position to attempt a rally. A rally attempt would have refueled sellers and resolved down anyway, but Thursday’s opening drop didn’t wait.

Friday’s ineffectual pessimism is no less likely than it was Tuesday and Wednesday to produce a rally. And it is as unlikely to extend down anyway. Thursday’s open overcame the odds by gapping down under prior lows, the only way a gap can attract more selling pressure than it is expending. So, gapping down Monday under 1086.00 would give sellers traction. If normality returns, then a rally triggered above 1095.00 would target the gap back to Wednesday’s 1108.00 close.

The bigger picture.
The prior week’s reaction low was 1085.00-1086.00, which held as support Thursday and Friday. It was already tested as support the prior Thursday, redundancy that eventually chips away at its support. The first bounce it produced could have extended higher. The second bounce was probably only obligatory and temporary.

Support at 1085.00-1086.00 has been chipped away sufficiently for its break to produce a productive downleg targeting 1064.00-1067.00. That could end a correction and launch a new rally leg, or its break would signal that a much more dramatic downleg was underway.

Sellers might refuel first, whether by filling the gap back to last Wednesday’s 1108.00 close, or by also probing new highs above 1112.00. That’s where last Tuesday and Wednesday’s ineffectual pessimism was supposed to have led. Friday’s ineffectual pessimism keeps the door open to some sort of rally attempt. Gapping down Monday would all but shut that door.

Indicators and Internals.
Friday afternoon’s high was a retest of the opening surge’s 1094.25 1092.75 peak, whose overbought RSIs had made it a likely objective. Its retest was not required, since the setup happened during the opening 15 minutes of volatility. Oversold RSIs at the 1083.50 pre-open low were the result of a spike down, so it isn’t even likely to be retested – at least, not due to the technicals.

Monday’s opportunities.
Expiration remains influential through the following Monday morning, which should hold the 1086.00-1095.00 range if the open doesn’t immediately break either end. The econ calendar gets off to a slow start. Then the deluge begins, as a week’s worth of reports are crammed into two or three days. The rally has tended to feed on econ reports, but it has also tended to detour when the news flow was heavy. Seasonal holiday bullishness could become obscured by the multiple reports and their effects on price action. [/pay]