Trading Plan for 1/12

[pay]Pattern notes.
Pessimism twice got excessive again Friday. First was a pre-open surge attacking 915’00, above the prior session’s high and likely to be retested intraday – but it wasn’t. Second was the overnight pullback low to 900’00 that launched the surge. There wasn’t a single uptick when revisited later as support, making its retest as resistance likely, but it wasn’t. The surge was produced by news, just one reason why neither retest was required, just likely.

Ignoring both tests in the same day reflects pessimism, which tends to appear towards the end of selling and not near its beginning. Unless neutralized like Thursday’s choppiness neutralized Wednesday’s pessimism, the drop could end this week’s ability to extend down this week. It’s not yet enough to off-set many other bearish factors, but should be monitored anyway.

Selling resumed in the afternoon with barely enough time to still be considered durable. And it did endure, closing under the morning’s lows, giving the effort relevance. An immediate corrective bounce can’t be ruled out, but only a corrective bounce, so long as Monday’s open doesn’t gap up above 893’00. Anything less is likely to resolve down.

Friday’s last downleg targeted the 880’00 area, another 3-5 points under the actual low. The bigger picture eventually targets the prior weeks lows around 853’50 – where the charts would allow a pause. This bigger picture is currently in-play, and it remains in-play so long as 893’00 is not recovered through a close.

Indicators and Internals.
Several hours separated Friday afternoon’s new session lows from the prior sessions’ lows – both the open’s and the noon hour. This undermines confidence in the comparison between technicals accompanying each. The afternoon’s RSI improvement is interesting because it is repeated on all time frames. But MACD deteriorated further into the close.

Monday’s opportunities.
It’s possible that Friday’s last-minute lower low pushed a little too far, enough for Sunday night’s open to attract buyers. Any such strength should be temporary if technicals deteriorate into a test or retest of 893’00, and then price reverses back under 888’00. The next lower objective is 866’00-868’00.

Monday’s econ calendar is empty, but gets busier into the week. Beige Book and various central banks’ interest rate decisions add some extra data points for the market to navigate. All the while looking ahead to next week’s inauguration, and the quarterly earnings onslaught that reaches onslaught stage on inauguration day.[/pay]