Trading Plan for 9/29
[pay]About that close (How the prior session ended)
Tuesday afternoon’s bias environment lapsed while attacking the noon hour’s 1137.50 lows. Two attempts stopped short of actually touching 1137.50. This optimism opened the window for a more dramatic drop, which sellers failed to exploit. The market abhors a vacuum, so it sucked in buyers to produce the opposite: a short-squeeze triggered above 1139.00, to new highs at the afternoon’s 1146.00 bias-up target.
Pattern points (And technical influences)
There was time for 1146.00‘s reaction to dip. The cash session close equated to 1142.75. Futures extended down to 1141.25. In either case, The probe above Friday and Monday’s 1144.50 and 1145.25 prior highs was rejected, costing buyers their traction.
More important is that the prior highs both were probed by a single leg from below. Just failing a probe of prior highs occurs when optimism is excessive – nothing that a little pullback and consolidation or a gap up can’t overcome. But the same leg probing and reversing back under two prior highs speaks to context: buyers aren’t chipping away at resistance, they’re being absorbed.
This context is still not a sell signal. It’s a sell the intraday rallies signal. Another probe of the highs that holds an actual test of Sunday night’s 1149.75 high could launch a more credible downleg. And a test of 1149.75 is likely so long as 1140.00-1141.00 holds as support.
Breaking under 1137.50 would suggest a retest of Tuesday’s 1127.25 low was underway. Simultaneously oversold RSIs there require its eventual retest. And there’s no reason to retest it at this stage of the pattern unless the intent were to break lower.
Bottom line (My underlying premise)
A rejection of new highs would not be inappropriate, nor has it been. A downleg is likelier to begin Thursday, but could be underway into Wednesday’s close. Closing above the 1144.50 area without yet probing Sunday night’s high could reflect enough tempered optimism to keep sellers from gaining traction before Friday.[/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.