Trading Plan for 9/10

[pay]Pattern notes.
What the Fed giveth… Tuesday’s selling left no unfinished business, testing both Friday’s open and closing gaps. It was relentless from the opening tick to its last. The cash session’s last tick. Futures bounced 5 points, settling 3 points off the 1223’50 low where S&Ps were down more than 43 points.

The Dow’s 280-point loss was relatively mild. Its outperformance during a decline tends to reflect cautious optimism as bigger money players think they’re bottom-fishing safer names. This doesn’t often end well for them – the managers, and the stocks.

Tuesday’s close was too deep for being only a corrective pullback. Wednesday’s open could gap up to reject it, extending higher for hours or days, but the gap back to Tuesday’s close would inhibit a durable rally from forming.
Indicators and Internals.
3-min RSI was oversold at Tuesday’s last-minute low, dooming to failure any subsequent bounce. NYSE up volume was 10% of down volume, and advancing issues vs. decliners wasn’t much stronger. The “extreme” selling pressure’s productivity wasn’t very lopsided, suggesting that sellers have plenty of energy left to continue pressuring the market lower.

Wednesday’s opening setup.
Last week’s decline was on-track to retest the year’s low at 1220’50, probably down to 1194’00. That still looks right, especially if bounces overnight hold any test of 1232’00. Now I expect the low to be probed more deeply, regardless of whether its test produces an obligatory bounce. Bias parameters will be published in the morning. The econ calendar is almost irrelevant, but that doesn’t mean no news will be good news. The calendar is very heavy Thursday and Friday.[/pay]