Trading Plan for 1/14

If December’s breakout is done… then can the bull market be very far behind? The reaction to last month’s FOMC meeting hasn’t been retraced. Not entirely, only by proxy.

Pattern points… (Setups and technicals)[pay]
December 18’s FOMC policy statement triggered a rally from fresh lows at 1761.00 back to the 1805.50 prior highs. The following session consolidated the rally before Dec 20’s breakout close at 1813.50, which the next session’s 1823.00 consecutive higher close had confirmed. That confirmed breakout was fulfilled by extending through 1843.00.

Last Monday’s lows had retraced the confirmation session’s 1823.00 close. That required also retracing the breakout close, at least to the breakout session’s 1816.00 “lower prior highs.” Monday’s plunge probed it down to 1809.50.

That can’t be the end of that. The consequence to retracing the breakout’s confirmation should do much more damage to the chart. Containing the downside damage now relies upon creating unfinished business above, capable of attracting price higher after a decline runs its course. Excessive pessimism from gapping down aggressively and probing supports prematurely might be the only bullish case.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Bouncing overnight immediately would leave outstanding a gap back to Monday’s 1813.50-1815.00 close, wanting to be filled. A corrective bounce has room either to 1820.00 or 1826.00 before suspecting more substantial upside might be interrupting the decline.[/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.