Trading Plan for 9/24
[pay]Pattern notes.
Tuesday’s last 40 minutes plunged 29 points. The last 2 points came after the close, and followed a bounce that started just before reaching prior lows. Those prior lows had just printed 2 hours earlier. A 2-hour, 60-point round-trip that bounces suddenly from ticks above the prior low instead of probing it? That’s optimism The post-close lower low? That’s noise.
The Globex open firmed several points – also noise. Then things got interesting when Goldman Sachs announced a $5 billion private placement with Berkshire Hathaway. S&Ps spiked up almost 10 points and surged another 10 points from there. Also noise? Overly-optimistic?
Recovery? The last hour’s rally tested ESz 1210’00 where I noted its recovery would mean something underway more substantial than a corrective bounce. Its probing held and produced a drop back to session lows. Despite S&Ps being 25 points lower, I noted that the downtrending could be reversed by gapping above 1210’00. That’s where the Goldman news peaked, so the recovery question can’t yet be answered “yes.” Until then, that’s the answer to the noise and overly-optimistic questions.
The likelihood for gapping above 1210’00 would become likelier above 1212’50. That’s not so close since S&Ps have retraced 9 points to 1198’00. Just being under 1199’50 would make the gap back to Tuesday’s 1187’00 likely to be filled – it will be filled eventually regardless, but doing so now would reinstate Tuesday afternoon’s decline, and waiting would have a chance to retest Friday’s high.
Indicators and Internals.
RSI made higher lows when S&Ps probed new session lows after Tuesday’s close. MACD didn’t join in, so the signals weren’t complete and any bounce they produced is questionable.
Wednesday’s opening setup.
Existing Home Sales is due at 10:00, timing that still tends either to accelerate or reverse any initial trending already underway. If the news – or any news – is greeted from under Tuesday’s lows then I would expect the reaction to extend the decline, or else doom a positive knee-jerk reaction to failure. A return to last week’s lows within the next week would be entirely too soon for a bottom to form, regardless of whether it produced a brief bounce.[/pay]