Trading Plan for 9/23

Was that a victory for bulls?… Thursday essentially ended the day where it began, in the 1122.00-1127.00 range. Repeated dips from this range were recovered —  from 1117.50, 1110.25 and 1106.75. Isn’t that accumulation? Well, yes… but, no.  [pay]

Pattern points… (Setups and technicals)
Normally, accumulation and distribution patterns include some stage of the trend probing, without those probes extending. In fact, those probes retrace. So, an accumulation pattern that appears in a downtrend would start bouncing back from its new lows.

But that’s just half the battle. Or, one-third.

It’s not enough to stop trending for the trend to end. What’s important is how that is exploited, if at all. And Thursday did not exploit it. While repeated probes  under the range’s lower-end each recovered back into the range, the range’s upper-end was never probed.

If buyers were absorbing the dips, then they would have been rewarded. They weren’t. That is an important element of reversing direction, because the lower lows are also chipping away at support. So, Thursday’s lower lows only chipped away at support.

One tell formed at the low —  an inverted Head & Shoulders. The pattern tends often to reverse price direction. Almost as often, it extends the current direction. In either case, that first move out of the Head & Shoulders is then reversed back into the pattern, and through it more substantially in the opposite direction. So, once the Head & Shoulders reversal is done, I would expect another reversal back into it, and then through it to new lows.

What’s Next… (Outlook and opportunities)
Sorry for the delay in today’s Trading Plan. As of this writing, the Head & Shoulders reversal has succeeded in probing Thursday morning’s 1136.00 high by nearly 2 points. That’s nearly 10 points above the afternoon’s highs. And it’s about 10 hours too late to gain traction. It might extend higher to 1143.00 or 1145.00, but it is only creating a heavier weight to drop on Thursday’s chipped away support.[/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.