Trading Plan for 9/12
[pay]Pattern notes.
Earlier I commented on the rarity of reversing from one bias target to the other, while the original target’s bias environment was intact. That was just the warm-up act. The one-hour, 18-point swing had corrected down only 10 point when a half-hour, 23-point surge blew out the prior day’s highs. And that was 42 points off session lows.
There’s still unfinished business below, but more pressing matters may have appeared. The “Gotcha!” setup is intended to identify such situations – when a rally is creating more buying energy than it is expending. It is triggered by closing back above a trend’s low close after probing new trend lows intraday. Wednesday’s new low was too brief and shallow to qualify. Did Thursday’s last-minute surge above prior highs disqualify the Gotcha again? Sliding at Friday’s open would suggest as much.
Thursday’s opening gap under 1218’00 requires an eventual retest, and I wouldn’t bet against it happening Friday if 1240’00 area fails to hold pullbacks. The 1240’00 area won’t break without bad news, not after three consecutive lower lows were recovered in two consecutive days. Lasting or not, the recoveries will inhibit sponsorship for a fourth sell-off before the weekend’s illiquidity. Ignoring that recent history in favor of breaking under 1240’00 would mean much bigger selling pressure coming down the pipeline.
Indicators and Internals.
3-min RSI barely went overbought at Thursday’s last-minute high. It had barely avoided becoming overbought on the session’s prior highs. This makes the rally seem more reactive than proactive, corrective rather than lasting. Internals diverged negatively, since more up volume than down volume produced more declining issues than advancers. That’s not easily dismissed since S&Ps ranged in positive territory for several hours Thursday afternoon. If the LEH/BAC rumor is all that prevented a significant peak, then it was only delayed.
Friday’s opening setup.
Sliding into negative territory would not be appropriate for a Gotcha setup, so it would not be bullish. But gapping down Friday instead of sliding would be different and would more likely recover – probably from the opening tick – in order to fill the resulting gap back to Thursday’s close. Several econ reports due in addition to LEH’s possible deal, including PPI at 8:30 and Consumer Sentiment at 10:00. All tend to be influential.[/pay]