If two-week old highs will be retested anytime soon… then Tuesday’s sell-off must be rejected without delay. Its lower close put into play much lower objectives.
Pattern points… (Setups and technicals)
1468.00’s overbought RSIs will always be a problem for a downleg trying to become a bear market. Any interim drop — including this current one — can be considered only a correction. But its “unfinished business above” was never a problem for inserting a sizable downleg, anyway.
And a sizable downleg may now be in-play. Holding last week’s 1443.75 low would have sufficed for retracing the FOMC rally. But closing under it Tuesday now requires a complete retracement back to its origin under 1431.00. It’s too late for Tuesday to close above 1443.75, and now lower targets are in-play.
But Wednesday’s open can reject Tuesday’s close by immediately recovering above 1443.75 and 1448.25. This is easier than it looks, since Wednesday’s Yom Kippur holiday exacerbated Tuesday’s sell-off to some indeterminate degree. Selling that wouldn’t have happened otherwise may have artificially depressed price.
What’s Next… (Outlook and opportunities)
Additionally, Wednesday’s trading volume is likely to dissipate, making it difficult to extend Tuesday’s trend. But just gapping up won’t be enough, since there is plenty of resistance above, and then a gap down below. Meanwhile, the FOMC rally’s origin wants to be retested, at least to 1433.00.
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.