Trading Plan for 9/24
[pay]Pattern notes.
Tuesday’s ineffectual optimism didn’t preclude the market from probing higher highs. It just warned that probes above prior highs would likely fail. So, overnight highs reversed down from 1070’50 to 1062.25. And the afternoon’s FOMC reaction up to 1075.75 was rejected down to 1055.25.
That last step was a doozy. When the pullback was only 5 points off its high, a close under 1066.00 would have all but ensured the next phase is down. Then S&Ps slid 15 points. Who knew? (I was ready to throw in the towel at 1062.00)
Sellers may have bitten off more than they could chew, undermining their own intentions. Left outstanding, that pent-up selling pressure would have helped it bleed into Thursday. Instead, the extended drop was borrowed on account, and Thursday need to pay it back.
Paying it back would just delay the game. Invalidating it would be a game changer. Wednesday’s last downleg originated at 1064.50, and immediately recovering it at Thursday’s open would reject the interim drop as if it never happened. A bounce actually has room up to 1065.25 just as noise around 1064.50, so anything shallower would be bearish. Even then, buyers don’t even begin to gain traction under 1068.00.
New selling sponsorship could arrive when the bounce is being retraced. Or it could arrive in time to force a gap down maintained under 1052.00. Any other scenario won’t yet tell us whether the next phase is some sort of downleg – corrective, or otherwise – or if it’s just more ranging sideways.
Indicators and Internals.
Both 1-minute and 3-minute RSIs were oversold at new lows with five minutes remaining until the cash session close. This was too late for the setup to doom any bounce to failure. Anyway, 1-minute RSI diverged positively on a lower low with two minutes remaining. That’s also too late to be predictive.
Thursday’s opportunities.
Econ reports appear both before and after Thursday’s open. They’re both already high-profile, but their timing adds to their influence on price action. Opening strength in reaction to the pre-open Jobless Claims would be credible if it cleared the bounce limit described above. Home Sales could knock things back down. As for the inverse, there’s not a lot of room for a false break lower, even if retraced substantially, without leaving outstanding a gap open below the market. [/pay]