Trading Plan for 9/27

The mid-afternoon news about a “Euro-TARP”… was widely-panned. I couldn’t agree more with its critics. Just one thing — the next two hours rallied 25 points to fresh highs. [pay]

Pattern points… (Setups and technicals)
The rally filled the gap back to last Wednesday’s 1159.25 cash session close. Last Wednesday being the two-day FOMC meeting’s announcement, which triggered a plunge into and out of the close. It is also a 50% retracement of the drop from Wednesday’s 1214.00 high down to Friday’s 1102.00 pre-open low.

Wednesday’s gap did not require being filled. But filling it does make some greater retracement likely of the leg that produced it. And the leg that produced Wednesday’s 1159.25 close originated from 1187.00. That’s some leg.

A greater retracement would target at least 1170.00-1171.00, and with potential to 1186.00. Pullbacks meanwhile have room down to 1149.00-1151.00 before sellers would regain traction. Overbought RSIs do suggest that a dip would recover.

What’s Next… (Outlook and opportunities)
The Jewish New Year begins at sunset Wednesday. Many market participants tend to leave well before the close that afternoon, and liquidity evaporates. Low liquidity tends to help price gravitate higher. A downleg were going to develop before Friday, then it should probably happen Tuesday. Look out below if the bias-up signal’s test is rejected, or if the bias-down is triggered. [/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.