Trading Plan for 11/22

Buyers rose to the occasion Friday. Too bad. Recovering all of the open’s gap down – and only the open’s gap down – didn’t leave any pent-up buying pressure to help extend the rally this week.[pay]

Pattern points… (Setups and technicals)
A lot of buying pressure was expended Friday without gaining any traction for the effort. The open’s gap down to 1194.25 had extended to 1187.50. This raised the threshold for buyers just to get back to even. They did, recovering to both Thursday’s 1195.00 cash session close and 1198.00 futures closes.

Buyers neutralized all of the gap down’s pent-up buying pressure. Had its recovery stopped short of filling the gap(s) back to either Thursday’s close, its attraction could have helped to resume the recovery Monday. At least a probe above Thursday’s high happened after the cash session close. Rejecting an intraday test would have robbed buyers of their traction.

This restrained optimism wasn’t quite pessimism. And while it did keep sellers from gaining traction, the burden of proof is on buyers. Tuesday’s close under another prior relative low had reinforced the prior week’s trend change signal. And Wednesday confirmed it. In this context, the bounce’s sponsorship showed up one day too late to be strong hands – so the bounce is only a correction refueling sellers.

Friday’s intraday recovery is similar. The morning’s drop remained under relevant levels through relevant timing windows. Its buyers were was weak hands, so their product was not accumulation. A bullish close would have been surprising.

What’s Next… (Outlook and opportunities)
Measurements allow Thursday’s ~1199.00 high to serve as the bounce’s peak, but that would require a break back under 1186.50. Whether gapping down, or on a closing basis, any reversal Monday would be credible. Otherwise, the next corrective target would be 1212.00.

Noise around 1212.00 is 1208.50-1217.00 – the could end at 1208.50, and closing above 1217.00 would mean the “bounce” was targeting new highs at 1228.00. Regardless of where the bounce were to end, in this pattern it should react down suddenly, sharply and substantially.

This week’s holiday is the least reliable for being seasonally bullish. Less liquidity often makes trending difficult, especially counter-trending. Regardless, the trend is down, so attempting to trend up is only stretching buyers thinly. If 1199.00 isn’t the bounce’s peak, then extending to the 1212.00 area could make Wednesday or Friday very negative.

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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.