Trading Plan for 9/19

If taper didn’t start in September… then October, right?

Pattern points… (Setups and technicals)[pay]
FOMC voted against tapering in September, after all. Fear of tapering began in earnest at August’s highs. Retracing the deep drop doesn’t change whether it happened. It can happen again.

Wednesday’s rally certainly got a lot of buying out of the way. I’ve never seen a post-FOMC environment trend relentlessly in one direction. Usually there are a couple of steep reversals. Wednesday’s announcement included Bernanke’s Q&A, which also extended in the original direction. Everyone’s a believer.

August’s high was still being tested as resistance until FOMC came at 2 hours before the close. Regardless of the degree to which it broke higher, it broke higher so late as to be suspicious of its breakout. This is where a “second consecutive confirming close” is so important. Closing higher Thursday would be bullish.

Closing negative Thursday, but above August’s prior highs, wouldn’t necessarily be bearish. WedEX triggered a passively bullish signal. Converting it to bearish at Thursday’s open essentially requires breaking back under 1697.50 through the open, perhaps just closing under 1692.00-1693.25. Anything higher, although negative, would still undermine sellers.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Overbought RSIs at Wednesday’s 1723.25 high require a retest. Reversing its test back into negative territory would likely reverse momentum down. At least overnight strength is likely in sympathy as global markets get a chance to react to FOMC news.[/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.