Trading Plan for 9/30

[pay]Pattern notes.
Tuesday’s last-minute low tested 1055.50. This level’s significance is that it was the reaction low when 10:00’s econ reports reversed the new session high. This bearish setup could have been undermined by closing above 1059.25, which was avoided, so there’s nothing bullish about it. But closing under 1055.25 would have confirmed it.

Futures did close 1 point below 1055.25. It’s not the same clarity, despite remaining below it well past the Globex open. Plenty can happen overnight, and the post-close excess selling pressure does risk there being too much pessimism to be fulfilled.

Tuesday’s only requirement was to expand the trading range and then to hold tests of its expanded range. The upper-end was above expectations. Its initial reaction created more violence that needed to be absorbed. So, a probe under the range’s lower-end was pushed onto Wednesday’s schedule (unless Wednesday’s open gaps up above Tuesday afternoon’s 1061.00 high).

A close under the 1052.25 would have confirmed sellers retained control. This is still targeted from Tuesday morning’s bias setup. If its test overnight produces a recovery, then sellers would be marginalized again. Otherwise, a bigger downleg should be underway soon.

Indicators and Internals.
RSIs were unwilling to extend into either overbought or oversold territory Tuesday, leaving no unfinished business to attract price higher or lower.

Wednesday’s opportunities.
Similar to Sunday night, neutralizing unfinished business below at 1052.25 could lead to a sizable rally intraday. Gapping up Wednesday above Tuesday afternoon’s 1061.00 high would trigger a session-long rally regardless of whether overnight action probes lower lows. Otherwise, Wednesday’s open is likelier to gap down or drop sharply so long as overnight bounces hold any test of the 1057.00-1057.50 area.

Don’t forget that we’re doing the weekly stock review mid-morning Wednesday. More information is at this link.[/pay]