Trading Plan for 9/26

If two-week old highs will be retested anytime soon… then Tuesday’s sell-off must be rejected without delay. Its lower close put into play much lower objectives.

Pattern points… (Setups and technicals)[pay]
1468.00‘s overbought RSIs will always be a problem for a downleg trying to become a bear market. Any interim drop — including this current one — can be considered only a correction. But its “unfinished business above” was never a problem for inserting a sizable downleg, anyway.

And a sizable downleg may now be in-play. Holding last week’s 1443.75 low would have sufficed for retracing the FOMC rally. But closing under it Tuesday now requires a complete retracement back to its origin under 1431.00. It’s too late for Tuesday to close above 1443.75, and now lower targets are in-play.

But Wednesday’s open can reject Tuesday’s close by immediately recovering above 1443.75 and 1448.25. This is easier than it looks, since Wednesday’s Yom Kippur holiday exacerbated Tuesday’s sell-off to some indeterminate degree. Selling that wouldn’t have happened otherwise may have artificially depressed price.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Additionally, Wednesday’s trading volume is likely to dissipate, making it difficult to extend Tuesday’s trend. But just gapping up won’t be enough, since there is plenty of resistance above, and then a gap down below. Meanwhile, the FOMC rally’s origin wants to be retested, at least to 1433.00.[/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.