Trading Plan for 9/17
[pay]Pattern notes.
Monday’s price action gave multiple indications of much greater selling pressure coming down the pipeline. Another 33 points were lost overnight, so I consider those indications to have been fulfilled. That could be pretty bullish. In fact, S&Ps rallied nearly 60 points from the low, traversing about 10 points more intraday than during Monday’s drop.
So did the session-long rally prove that selling pressure had run its course, or did it fulfill that pressure? Perhaps a little of each.
Selling for selling’s sake may have ended, but that doesn’t mean a rally can begin or that the low can’t be retested. Indeed Tuesday’s pre-open low is a new Globex trend extreme at 1163’00 that requires an intraday retest. Meanwhile the rally into Tuesday’s highs fulfilled its highest likely target. And then it peaked, instead of renewing buying pressure that might have attracted price higher. Several attempts to restart the rally as high as 1221’00 were rejected into and out of the close, before the Globex open tumbled to 1197’50.
I’m open-minded to the potential that a durable bottom is forming and that a larger multi-session corrective bounce is being readied. That means a drop back down to Tuesday’s lows need not be fatal. There’s a lot of room for noise to fluctuate without trending any further day-to-day. There just isn’t a lot of time.
Indicators and Internals.
The 3-min RSI was oversold at the low before Tuesday’s open. The timing makes it likely to be retested, not required. There is no similar unfinished business above the market.
Wednesday’s opening setup.
The final disposition of LEH and AIG is ongoing. The econ calendar isn’t very busy, but Friday’s options expiration should start influencing price behavior. The pattern into Tuesday’s close formed a bearish Double Top whose interim consolidation was sloped up, which the Globex open’s drop seemed to fulfill. The same pattern ended Friday’s session, and being a corrective pattern, Friday’s session then ended with a last-minute surge to higher highs. An overnight recovery to higher highs would be likely to peak and reverse down substantially, probably from the 1224’00-1225’00 area.[/pay]