Trading Plan for 9/16
[pay]About that close (How the prior session ended)
The afternoon’s 1115.00 bias-down signal was attacked twice, while testing uptrending pivotal support off the morning’s lows. At least an obligatory bounce was likely. A recovery above 1118.50 through 3:00 could have marginalized sellers for the day, but only reached 1121.75 after 3:30. Despite being so late, the bounce was rejected by a drop back down to 1115.50.
Pattern points (And technical influences)
We knew since Monday morning that buyers weren’t gaining any traction at these levels. But Tuesday was the first day to probe a gap up’s highs, instead of gapping up altogether. Buyers were growing more impatient.
The morning’s fresh high was rejected, so impatient buyers were finally suffering a consequence. The bounce out of the afternoon’s bias environment was retraced, too. In fact, post-close action has already extended down another 2 points to 1113.00.
We also knew that Tuesday morning’s low did not form a durable bottom. Its oversold RSIs and Ascending Triangle are likely to be retested. Having probed new highs in the interim, the low’s retest will probably be done by a downleg – retesting the low from a lower level would have been intended to refuel buyers for a bigger rally.
Monday and Tuesday’s price action have potentially formed an Island. Gapping down Wednesday under last week’s 1106.00-1107.00 lower prior highs would confirm. Testing 1106.00-1107.00 Tuesday would have refueled buyers for a bigger rally leg. Now, brief support there would be followed by a substantial and steep drop. Sliding down to 1106.00-1107.00 now might still launch a bounce, but not necessarily.
Rallying out of Wednesday’s open could extend higher, and would deserve that benefit of the doubt. It would also get a tight stop, as buyers have yet to prove they’ve gained traction while expending all their energy.
Bottom line (My underlying premise)
Gaps up above prior highs, shallow dips, then gaps up. This is a self-preservation tactic of failed rallies. It can continue indefinitely, but only ends one poorly. The early evening rejection of Tuesday’s higher high confirms its rejection, and its distribution. It has yet to signal trend reversing down for anything more than 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.