Trading Plan for 11/4

One wild swing begets another… The sizable overnight drop and its more sizable pre-open recovery stretched optimism too thinly. Its eventual recovery still ended the day just above the overnight high. Buyers expended a lot of energy ahead of Friday’s high-profile econ report. More importantly, the market embraced fluctuation, just ahead of the same highly-influential report.

Pattern points… (Setups and technicals)[pay]
The afternoon bias environment fulfilled the retest of the 1154.75 pre-open high. It was tested up to 1256.75. And retested while RSIs diverged negatively. A dip tested their 1252.25 interim low.

No unfinished business above. Buying pressure waning. Timing window lapsing… And big news item just ahead (Friday’s pre-open Employment Situation report). What a wonderful opportunity for a sell-off — whether to discount pessimism and anxiousness ahead of the report, or to start a new downleg.

One catch: Reversing down from session highs can’t wait until the last minute. And the last minute is the bias environment lapsing at 2:30. At last the afternoon’s 1251.00 bias-up signal was touched, launching a rally up to 1259.75.

This action definitely reflects optimism, but not necessarily excessive optimism. Unless Friday’s open were to reverse down under a relevant support, fresh highs are likely, and likely to extend higher.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Thursday’s close did not trend up, so gapping down under the afternoon’s low may not be difficult to absorb. Having closed above 1248.00, a second consecutive higher close would make the rally likely to extend through Monday’s open, targeting 1279.50 and higher. But closing under 1238.00 would signal the rally had ended, and a new downleg was underway. [/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.