Trading Plan for 9/30

Last week’s bottom couldn’t launch a durable rally… which Thursday’s low proved. Its 1133.50 low retraced all of Monday’s breakout — up to 1190.00 and back down again. It’s not deep enough. And Thursday’s late bounce raised the stakes again.[pay]

Pattern points… (Setups and technicals)
Last week finished with an “inside day,” not incapable of launching a bounce, just incapable of launching a durable rally. That much was settled by retracing back down to the consolidation’s 1135.50 upper-end. But that much isn’t enough. A false breakout must also retrace back into the pattern that launched it. A 61.8% retracement back into Friday’s range equates to 1118.00.

That will have to wait. Thursday’s last timing window bounced back to 1148.25. Then it extended up to 1157.50. The bounce portion could have left further upside on the table to help resume the bounce Friday. But the extension already borrowed from that.

Although buyers got ahead of themselves, a decline doesn’t automatically begin. A pullback has room back down to 1148.25 before sellers start gaining traction. And then down to 1146.00 before signaling momentum has reversed down.

Absorbing a dip, or simply extending higher to fresh highs above 1161.00, could test 1181.00 before the close. That would be a neat trick, and an interesting paradigm shift — optimism into the weekend.

What’s Next… (Outlook and opportunities)
Don’t forget about Saturday’s Strategy Session. It starts at 9:30am ET and its link is found in the sidebar. [/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.