Trading Plan for 11/29

If Wednesday’s recovery only corrected the morning’s drop… then can it probe above the downleg’s origin? Yes. Wednesday’s recovery did probe fresh highs in essentially fulfilling what would have been the afternoon’s renewed bias-up target at 1409.00. Rejecting that last part of the recovery would resume Wednesday’s initial decline — much more productively.

Pattern points… (Setups and technicals)[pay]
Gapping either up or down Tuesday would have been credible for extending the rally, or for reversing it. Tuesday instead consolidated the rally. Gapping was no longer appropriate Wednesday. But Wednesday’s open did gap down sharply.

That doomed the morning’s downleg to failure, whether sooner, or later. It happened to be sooner, albeit after dropping much lower, but the doomed downleg was retraced entirely.

Relevant levels were tested at the downleg’s low, i.e. both ends of last Wednesday’s narrow 1383.50-1388.75 pre-holiday range. In other words, the low did not develop at an arbitrary level. Recovering all the way back up to the drop’s 1407.75 prior high means that the rally intends on extending to the next relevant level(s).

1412.75 and potentially 1416.00 are in-play, unless Wednesday’s recovery were rejected immediately at Thursday’s open. Only the last consolidation of Wednesday’s recovery need be retraced to reject it all, and then only 61.8% of it, back under 1401.00. (Opening under 1400.00 would also trigger a session-long decline). Otherwise, the next opportunity for a downleg would come from fresh highs.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Immediately probing fresh highs Thursday could also launch a new downleg, if the fresh high were rejected through the open. Otherwise, assuming any initial opening strength isn’t rejected, not already reversing down would make the morning likely to trend upward throughout. [/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.