Trading Plan for 11/25
[pay]Pattern notes.
Did Monday’s rally leave something on the table that can motivate its resumption Tuesday? The open’s large surge had made the expected rally capable of reaching ESz 865’00 and 875’00. Only the lower target area was tested, almost 5 points short of the 870’25 target created by afternoon swing measurements. Had the session simply closed there, then the higher target would still be likely.
But Monday’s reaction got carried away and plunged all the way back down to the afternoon breakout’s 838’00 buy signal. S&Ps firmed more than 10 points into the close, which has held so far overnight. So, is the higher target still likely? Is it high enough?
I’ll expect a retest of Monday’s high, so long as Monday’s last-minute drop represents the worst of it through Tuesday’s open. This includes room for a retest the drop’s 837’00 low, but not much time. Preferably the open will already be advancing, but it should at least be recovering from any opening dip. There is potential up to 880’00 if sellers haven’t regained control before or after retesting Monday’s high up to 870’25.
Volume will start to evaporate Wednesday ahead of the Thanksgiving holiday. Buyers might run out of steam but the market could still range up here into Friday. Sellers will need to retake control early Tuesday afternoon if they don’t intend to wait until next week before proving this is only a bear market bounce. That argument would already be won if pullbacks don’t hold 829’50 as support.
Indicators and Internals.
RSI was stuck in overbought territory during the last of Monday afternoon’s rally. While that obviously created a vulnerability, it should have also reflected an underlying strength not easily deterred. It’s no particular overbought reading, but the persistent overbought readings that help to suggest Monday’s high will be retested.
Tuesday’s opportunities.
An dip hasn’t yet happened four hours into the overnight Globex session, so one would lack credibility if it appeared now. So long as 829’50 were not threatened, the rally’s resumption would be the plan. The resumption itself might soon peak, but we’ll deal with that eventuality as it approaches – probably Tuesday afternoon, although the pattern might allow a turn overnight after the close. Retail sales reports come out pre-open, with Consumer Confidence at 10:00. [/pay]