Trading Plan for 11/6
[pay]Pattern notes.
It would seem that for investors, “Hope” and “Change” mean “I hope the direction will change.” Some – almost half the country – might be tempted to view Wednesday’s plunge through the lens of political bias. The temptation is understandable since the correlation seems so obvious. But that’s just not how it works. To see the market’s biases more clearly, view the market without your own biases. Let others search the market for their own reflection.
Wednesday’s drop had nothing to do with the elected, and everything to do with the election. The impending event was using up all of the room’s oxygen. Now that it is history, there is no comparable event or combined events to singularly attract and crystallize the market’s attention. After looking up for the past week, the breather allowed a chance to look down, and there was quite a bit of room below.
Monday’s Trading Plan pointed out the Complex Ascending Triangle whose false break target was met and held at Friday’s high. Tuesday’s rally obviously exceeded the target, but not when combined with Wednesday’s immediate reversal. In fact, Wednesday’s close was the lowest of five sessions that include the triangle, itself. A close back above ESz 970’00-975’00 might put buyers back on top, but otherwise the top is in and the decline’s lows can be retested.
Indicators and Internals.
A very late positive divergence before Wednesday’s close wasn’t enough to avoid sharply lower lows a little later. Another divergence at those lower lows didn’t produce very much of a bounce before 3-minute RSI found itself oversold again at midnight to inhibit the next bounce. This technical action undermines buyers’ efforts, similar to Wednesday afternoon’s last consolidation. Another steep downleg may be getting underway if buyers don’t quickly push price higher.
Thursday’s opportunities.
Wednesday’s low stopped 1 point short of touching the 946’00 target. Lower lows at the Globex open reached 943’00. The next lower target is at 940’25, where Thursday’s open would be likely to gap open if buyers don’t gain traction overnight back above 965’00-970’00. Gapping down to or through 940’25 would target 927’00, 913’00 and 890’00. The scarier the drop, the better the chance of it attracting all available sellers so that a bottom can form and a durable rally can be launched.[/pay]