Trading Plan for 9/26

If Wednesday”s rally was only a correction… then is the high”s retest a long way off? Wednesday”s close above Tuesday”s high gained traction. Traction that could be invalidated only by rejecting it at the following open. Which happened Thursday by gapping down back under Wednesday”s high. The burden of proof is on buyers.

Pattern Points… (Setups and technicals)
Tuesday and Wednesday”s lows narrowly avoided closing under the prior Monday”s low. And that avoided reversing the trend down. Monday”s low is the interim low between the last two highs. Closing under it Thursday has signaled a “trend change.” 

The signal must be confirmed by not immediately recovering the trend change signal. That”s a pre-open low at 1968.50, an intraday low at 1969.50, a close at 1976.00 and an intraday high at 1979.00. Closing Friday above any of these levels would buy time to immediately recover the rest at Monday”s open. Otherwise, the trend change is confirmed.

Although the confirmation is different than a breakout (which would require a second consecutive lower close), a confirmed trend change signal would also forecast an eventual third lower closer. Maybe more, but at least one, and necessarily consecutive to the signal and its confirmation.

Confirmation wouldn”t be surprising, but neither would invalidation. Volume accompanying Thursday”s drop was thin due to the holiday. Of course, it”s not much better on Friday.

What”s Next… (Outlook and opportunities)
Also undermining the trend change is Thursday”s close narrowly avoided a hold-short signal. That often resolves by probing fresh lows overnight, and being in recovery mode at the following open. That said, there was nothing bullish about Thursday afternoon”s sideways range, just because it spent so long preventing the decline from extending — it also spent a long time not recovering.

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