Trading Plan for 11/9

If Thursday’s last-minute slide was weak-handed pessimism… then must Friday’s open reverse up immediately? Extending lower during the morning could still be recovered, but that’s a dangerous bet without yet being signaled.

Pattern points… (Setups and technicals)[pay]
Thursday’s second consecutive lower close confirms Wednesday’s breakout close under 1397.00-1397.75. Regardless of the 1348.00 that it put into play, at least a third lower close is all but required. But not necessarily a consecutive lower close.

Having signaled and confirmed objectives below, sellers might now rest on their laurels to refuel, allowing a counter-trend bounce to trap longs. No bounce is required, and the alternative at this stage is often to aggressively extend the confirmed signal — i.e. trade down painfully.

There is no unfinished business below. Thursday’s slides came too late to trigger a pattern, and its last-minute oversold RSIs don’t require a retest. The pattern is vulnerable nevertheless to extending down — sharply, and by gapping — and extending down with the trend is more likely. But gapping down, perhaps sharply, is essentially the only path lower to avoid a significant corrective bounce through Friday morning.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Thursday afternoon’s sellers may have feared that Wednesday’s plunge was about to repeat. They may have accelerated week-end selling ahead of a perceived rush Friday, in case it is exacerbated by sellers that fear the weekend’s impending illiquidity. All of that fear often soon leads to a low. Other times it is justified, a long time coming. [/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.