Trading Plan for 9/15

Wednesday’s about-face was more impressive… than its overall range. But that was pretty impressive, too. Its last upleg suffered the same fate as its overnight drop — too much, too soon.[pay]

Pattern points… (Setups and technicals)
Oversold RSIs at Wednesday’s 1155.00 low require a retest. So does overbought RSIs at its 1196.25 high. The low’s test launched a 41-point rally. The high’s test launched a 14-point dive. A great example that overbought and oversold RSIs can launch significant moves before their retests are fulfilled.

Each reaction to overbought and oversold RSIs is sponsored by weak hands. Again, the low’s buyers sponsored a 41-point rally, and the high’s sellers sponsored a 14-point dive. Another great example that weakness is relative.

Overbought and oversold RSIs are not timing indicators. They only provide context to better understand the reaction’s sponsorship. The rally’s short-squeeze characteristics, the late drop’s plunge… this range will be traveled again, soon.

Meanwhile, Wednesday’s Expiration Indicator is suggesting a downward bias into and out of the weekend. The size of Wednesday’s intraday rally was irrelevant, only that its 1196.25 high was well-positioned to close above last week’s high. It didn’t, and the size of its reaction down was irrelevant, except that it closed under each support it tested.

What’s Next… (Outlook and opportunities)
In either setup, a retest of Wednesday’s 1196.25 high, perhaps even up to 1201.50 is still possible. Gapping up strongly, and surging quickly to fresh highs would be capable of extending sharply higher intraday. Any lesser opening strength could still retest 1196.25, perhaps even 1201.50, but their reaction down would be likely. Simply sliding, or breaking under 1176.00 through any relevant timing window, could trend down sharply intraday.[/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.