Trading Plan for 11/19

If Friday’s stunning intraday rally anticipated a resolution to the fiscal cliff concerns… then Friday’s lows are at great risk of being retested. I’m neither an economist nor a political pundit, but I don’t expect compromise to come this seamlessly. If at all. Regardless, I don’t view the recent decline as having been due to the fiscal cliff. Meanwhile, the hope for its resolution is more bullish than the actuality, which would put that optimism behind us.

Pattern points… (Setups and technicals)[pay]
The Wed-Ex indicator’s influence, ultimately, was valid, keeping Friday afternoon under pressure. Price action was actually biased downward from 1356.00 to 1348.00 at bias environment’s exit. Its reaction up to fresh session highs at was nonetheless retraced back to 1356.00 at the cash session close.

When Wed-Ex is only nominally influential Friday afternoon, but influential, then Monday morning often compensates. It could be from gapping up dozens of points, but be aware that post-open action could still trend down through the morning.

Oversold RSIs at the afternoon’s 1348.00 reaction low require a retest. And the session’s “outside day” suggests that impatient buyers have already expended too much near-term energy. Meanwhile, after having trended up into the close, gapping down under Friday afternoon’s 1348.00 low would signal a “session-long decline.”

So, the bearish resolution remains a risk, even if only limited to Monday morning. After that, the multiple tests of  1348.00, twice also testing 1342.25, could form a durable bottom if still holding into Monday afternoon

[/pay]What’s Next… (Outlook and opportunities)[pay]
We’ll discuss the potential bottom — and ongoing risk of further decline — at the Saturday Strategy Session. Any stock requests will be addressed then, too. See you at 9:30am ET.[/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.