Trading Plan for 11/7

Friday’s gap down was retraced entirely… at least, back up to its open. And then a little further. But the gap back to Thursday’s close remains open. Never fear, there’s plenty of headlines on their way.

Pattern points… (Setups and technicals)[pay]
A second consecutive close above 1248.00 Friday would have marginalized sellers through Monday. It was still being tested within 3 minutes of the close. True, a last-minute surge touched 1251.75 and a post-close surge touched 1253.25. The burden of proof was on buyers — last-minute and post-close do not suffice.

Neither buyers nor sellers are marginalized. The market tends to reward both. Probing Thursday’s 1259.75 high up to 1262.00 would be vulnerable to reversing down. Opening weakness would be capable of recovering, but less likely since the afternoon pullback already tested and held support.

Too much weakness Monday would also be vulnerable to extending down. Friday morning’s probe under 1237.50 to at least 1235.00 already retraced too much of Thursday’s recovery to be only its correction. Instead, Friday’s recovery is probably the bounce, and should be doomed to failure.

Resuming the decline would be attracted down to Thursday’s 1230.50 whose oversold RSIs require a retest. Monday morning weakness would be difficult to recover, so fresh highs are likely first if they’re likely at all. And extending the fresh highs could retest the prior week’s 1279.50 and 1289.25 highs if given the right tailwind.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Weekend headlines used to wait until Sunday morning’s political talk shows. Now they aren’t even waiting for Saturday. The Greek government’s vote of confidence over handling of its debt crisis should be tallied Friday evening (ETA 6:00pm ET). [/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.