Trading Plan for 11/6

[pay]Pattern notes.
Thursday morning’s probe above Wednesday’s high peaked at 1062.00 – its reaction dipped back under Wednesday’s 1058.50 high. A close above 1062.00 would have qualified as a breakout.

That should have been easy enough. The first dip of 6 points was retraced by 7 points. The next dip of nearly 5 points was retraced by 5-1/2. Then a final, shallower dip was also retraced into fresh session highs at 1064.00. But despite each recovery’s productivity, their interim dips each overlapped 1062.00. The morning’s high was still being tested throughout the afternoon. This doesn’t qualify as a breakout.

Too bad. A clean break above Tuesday high would have signaled that buyers gained traction intraday. And that would have helped Friday’s session absorb any selling pressure that might come its way in reaction to Friday’s Employment Situation report.

Yesterday’s Trading Plan detailed all of the selling pressure that was satisfied or otherwise neutralized by Wednesday’s last-minute plunge. Thursday’s buyers weren’t any more productive than Wednesday’s – whether Thursday’s close was under Wednesday’s high, still ranging around it, or ranging around the 1062.00 peak of its first breakout attempt.

This doesn’t prevent a positive reaction to Friday. A convincing breakout might have been restrained by the impending news. Regardless, Thursday’s rally was just part of a corrective bounce. Extending higher would next target 1071.00 and potentially 1083.00. Otherwise, the decline’s next downleg could be underway within hours.

Indicators and Internals.
RSIs spent the day rejecting the lower-end of its possible range. Much more time was spent above the range’s midpoint, reflecting buying pressure. But buying never got overbought to reflect accumulation.

Friday’s opportunities.
Thursday’s upward slope makes it easier to react positively to the Employment report, since it wouldn’t originate from a standing stop. But that upward slope also borrowed from future buying pressure. Beware of a break higher that soon reverses negative, whether before or after the cash session open, in any case before a bias-up can be triggered.

Retracing the initial reaction need not reverse much beyond unchanged. Trading out the day Thursday around its prior high is potentially equilibrium, whose first few trending attempts away from 1062.00 will tend to retrace entirely.

An negative reaction could be the product of an initially positive reaction that reverses into negative territory before the open. Either way, maintaining a gap down under Thursday afternoon’s 1058.25 low would signal a session-long decline.

This is a Friday, so the morning’s bias is likely to persist through the noon hour. The bias isn’t triggered until 10:15, so don’t forget about another econ report due at 10:00.[/pay]