Trading Plan for 9/23

[pay]Pattern notes.
Tuesday’s open gapped up, probed prior highs, and spent the entire session in positive territory. It doesn’t get much more optimistic than that. Not without also trending up to close above those prior highs, instead of them holding their test as resistance.

The result is “ineffectual optimism.” No price action accompanying Tuesday’s new high close even probed new highs, but it did probe week-old price action. Ineffectual optimism tells us to be prepared for either an opening drop, or for opening strength to fail. It’s not a sell signal, and it doesn’t preclude further optimism.

New high closes can invite retail buying, buying that might yet gain traction. After all, Tuesday did chip away at some resistance, and there’s no requirement for sellers to suddenly retake control Wednesday at a price they ignored just one day earlier. I would respect a breakout maintained through a relevant timing window, regardless of how it’s probably too late for a new, steeper upleg to begin.

Indicators and Internals.
Both 1-minute and 3-minute technicals have been as subdued as their price action. But they’re still predictive. Tuesday morning’s positive divergence and the noon hour’s negative divergence each reversed the prevailing trend. But no afternoon extremes leaves nothing for the next open to fulfill.

Wednesday’s opportunities.
New highs are not a sell signal, and new highs that print overnight are likelier than not to be retested intraday. Tuesday’s recovered dip was an excellent example of the lengths to which the market will go for this. New highs delayed until after the open are more easily reversed, assuming that technicals are deteriorating.

Overnight weakness under 1061.00-1062.00 could find Wednesday’s open sharply lower. Otherwise, opening weakness need break under only 1064.00 to start pushing back against recent highs. In any case, although FOMC announcements have lost their imapct, anticipation can still paralyze price action.[/pay]