Trading Plan for 9/28
[pay]About that close (How the prior session ended)
Breaking more than 2-3 ticks under a productive pullback limit is effectively a sell signal. Monday’s drop at 3:30 broke under 1143.50 by more than 2-3 ticks, and extended down to fresh session lows at 1137.00. The close was still ranging around the afternoon’s 1138.00 bias-down signal, so it was not clearly broken.
Pattern points (And technical influences)
Gapping down Monday under 1140.00 would have trended down. The level is still relevant, but closing under 1140.00 doesn’t trigger a downtrend (1138.00‘s break would have done that). It does, however, add yet another bearish argument. As yesterday’s Trading Plan concluded:
No unfinished business above, but not rejecting a probe of the prior high. Low-volume Friday afternoon, but no pushback off of resistance, ahead of the weekend. The dark side of excessive optimism is fear to sell – in either case, not the stuff of sustained rallies.
Now another prior high has been probed (Friday’s). And this time it was rejected, by closing under the morning’s 1138.50 interim low. More context that rally attempts cannot gain traction in this pattern. But not that rally attempts have ended.
Recovering 1141.00 at Tuesday’s open, confirmed above 1142.75, would target 1149.25 and 1151.25. Tuesday’s 1135.50 bias-down signal isn’t much below Monday’s close, but triggering it could make the difference between trapping more longs, or driving them to the exits.
Bottom line (My underlying premise)
Probing fresh session highs in positive territory Monday afternoon proved the morning’s sellers were weak hands. The problem was that strong handed buyers didn’t fill the void. The market abhors a vacuum, and if one side fails to exploit the window opened for it, then the other side will be sucked through it. It’s another opportunity for buyers to exploit, however temporarily. But not exploiting it Tuesday’s open could once again suck in sellers for another downleg. [/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.