Trading Plan for 9/19
[pay]Pattern notes.
Thursday’s close was above the morning’s high, which is important because it was produced by gapping up from a downtrend’s new low. That, and because the close came after recovering from a new trend low intraday. The setup is a Pivot Reversal that tends to extend higher for multiple days.
Pivot Reversals that don’t extend higher are usually busy extending lower. Trading flat to lower Friday could be very bearish. A 3-hour, 82-point rally might seem impervious to reversal – corrective retracement maybe, but reversal?
Several reasons against extending higher Friday. 1) Thursday’s last-minute high filled the gap back to Tuesday’s 1217’00 close, leaving no unfinished business at higher levels to attract price higher. 2) The late surge far exceeded the morning’s high and expended buying energy that might be sorely missed at Friday’s open. 3) The last pattern prior to the high was a Running Correction that tends to precede a trend’s end. 4) The low was a “V” bottom that tends to be retested eventually.
The preliminary work of a market crash is to squeeze all available funds from market participants, i.e. refuel. Multi-hundred point intraday rallies that recover no relevant real estate allow the decline’s chart to remain intact. It also greases the way for renewed selling. I will be among the market’s biggest bulls if the 1220’00-1223’50 area can be recovered on a closing basis. Meanwhile, I continue to marvel at the market’s big bull&4!+ it has been getting away with, and might still be.
Indicators and Internals.
1-min RSI deteriorated and diverged negatively into the running correction that preceded Thursday’s last-minute high. It was similar to Gold’s chart through a couple of days ago. We expected it to trade a little higher before peaking, but not dozens of points. The S&P deterioration is similar, and not declining Friday or else at Monday’s open would start to be very bullish.
Friday’s opening setup.
The econ calendar is clear in deference to the session’s Quadruple Witch expiration. Bonds have in the past also traded un-remarkably in respect, but there have been a couple of exceptions recently. I will update here and visit the charting room overnight in case of earlier setups. [/pay]