Trading Plan for 9/25

[pay]Pattern notes.
Tuesday’s ESz 1280’00 target was met within 1 tick Wednesday. Selling pressure had just been satisfied, RSI was making higher lows, and the cash session close was just minutes away. The combination formed a perfect storm that swept up S&Ps 13 points into the Globex open.

The last-minute recovery prevented a losing day. The cash session’s range was relatively narrow, so the recovery was a relatively narrow success. The success pales further when compared to the overnight range that had rejected the post-close surge from Buffet’s Goldman stake. Move over Warren, here comes the Bush…
S&Ps had pulled back 7-1/2 points to 1186’00 following Bush’s televised address, which helped to spark a 12-point surge up to 1198’00. That’s essentially Wednesday’s cash session highs, where a break would target a retest of Tuesday night’s 1210’00 high. And a break there could trigger a retest of last Friday’s highs. A lot is riding on the overnight price action.

Indicators and Internals.
1-minute RSI is overbought on the surge to 1198’00, making a pullback likely. The 3-min is also overbought, making the pullback likely to recover, if not also extend higher. Nothing requires a pullback’s recovery to become a new upleg.

Thursday’s opening setup.
Jobless Claims and Durable Goods at 8:30, then New Home Sales at 10:00. Hopefully no defaults in between. It is difficult to generate sponsorship for trending in this environment. By the same token, trending in this environment – especially trending contrary to the tenor of the news – is that much more likely to extend. So, rallying on bad news will get a benefit of the doubt, and breaks of support will get tight stops.[/pay]