Trading Plan for 9/22

A different kind of “Freshman 10″… Be sure to join us in the Chartroom at 6pm ET Thursday for an introductory workshop. We’ll review the 10 important concepts and uses of my service.[pay]

Pattern points… (Setups and technicals)
It has been considered daily whether there were any outstanding punitive consequences to last Wednesday’s Expiration Indicator. Its downward bias through Monday morning had only retraced Thursday and Friday’s gains back to Wednesday’s close. The slope was pretty significant, but it still left something to be desired. Wednesday’s slope was pretty significant, too. I would now consider the indicator’s influence to be moot. But it does feel like it is still trying to compensate for the delay.

Wednesday’s close was in the process of testing a relevant support. Between that, and its sharply oversold RSIs, holding short through the close could not be signaled. This doesn’t prevent trending down further, and without delay. But for the signal’s purpose — identifying situations likely to gap down much more than they are prone to gapping up — Wednesday’s close did not qualify.

Notice on the above chart that Wednesday’s close was in the process of testing the 1157.25 61.8% retracement of the Labor Day week’s swing. This is natural support when tested from above the swing’s interim high. There is still room down to 1146.25 to drop further without yet requiring a probe under the pattern’s lows —  confirmed under 1140.25. But now that the 61.8% retracement has been tested, not closing under it Thursday would rob sellers of their traction.

A new downleg at this stage of this pattern would likely contain the required retest of 1077.00‘s “new Globex trend extreme.” Closing above 1171.00 would suggest that a correction had just run its course, with fresh highs targeting at least 1221.00.

What’s Next… (Outlook and opportunities)
Price hasn’t budged much in the several hours since dipping to 1155.50 into the futures close. A lower low touched 1154.50, even further below the 1159.25 cash session close. This action, or lack of it, suggests the market is very much interested in the global reaction to Wednesday’s plunge. [/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.