Trading Plan for 11/4
[pay]Pattern notes.
There is a debate between whether an ongoing decline remains underway, or if a strong corrective bounce is preparing to begin. Tuesday’s cash session contributed nothing to it.
Monday afternoon’s recovery wasn’t credible for reasons described in yesterday’s Trading Plan. Its complete retracement overnight seemed to confirm this. That same ground was recovered again very soon after Tuesday’s open. The debate could have ended by extending that second retracement into positive territory. But the debate lives on, as Tuesday afternoon’s probes into positive territory never gained any traction.
The natural question is, “what’s the hold-up?” Two probes under last week’s low. Two recoveries back into positive territory. Two sudden stalls. What’s the hold-up?
Tuesday morning’s bias-down environment absorbed bounces, and rejected positive territory. Overnight lows should have been the next stop, but sellers were denied. Buyers absorb selling pressure in order to launch a rally. So, where’s the rally.
The 1039.00 area is now in its third or fourth day of acting as a floor, which is a long time to prevent the prior trend from extending. Simply ticking higher from here won’t be appropriate for a rally to be underway – not even for a 2-3 day corrective bounce.
Absent an immediate and obvious rally at the open, the balance of the morning should be back on defense. An intraday dip to new lows under 1026.00, and a recovery back above Friday’s 1032.25 low close, could be a good start at trapping shorts. The problem is that an intraday dip to new lows under 1026.00 would also be a good start at resuming the decline.
Indicators and Internals.
RSIs were reluctant to get overbought or oversold Tuesday. And much of the day was spent nailed to the middle of its range, reflecting stable buying and selling. This, too, shall pass. Tuesday’s range was, after all, an inside day.
Wednesday’s opportunities.
Perhaps the market’s reluctance to decline is that it knows of news on its way. The morning’s econ reports are interesting only for what they might imply about Friday’s Employment Situation report. The 10:00 report has a history of influencing price action, but not to the point of inhibiting the prior session from trending. Guessing the FOMC’s interest rate decision isn’t rocket science (it’s hardly even economics). Perhaps some news coming in the release? [/pay]