Trading Plan for 1/14

[pay]At the close (How the prior session ended)
S&Ps ended the day backing off of the session high. The 1145.25 session high was also Monday’s opening gap, which had yet to be retested intraday. Minutes earlier the gap had been filled back to Monday’s 1142.50 close.

RSIs deteriorated there, dooming to failure any higher high. In fact, the upleg launched there was entirely retraced into the close. Before retracing, the rally was smart to leave a couple of breadcrumbs to help find its way back up to Wednesday’s high.

First, the impatient, instant dip came after barely touching Monday’s 1145.25 open. This reflects pessimism, which doesn’t often accompany durable peaks. Second, RSIs were overbought at the 1145.25 high, making its retest likely.

Pattern points (And technical influences)
Extending the rally Thursday requires gapping up. There is a consolidation (circled in orange) that formed overnight before Monday’s cash session even opened. Wednesday’s high pierced this consolidation’s 1144.75 lower-end (red line). Not having closed within the consolidation, it can now be exceeded only by gapping above its ~1147.00 upper-end (green line).

While the rally’s resumption depends upon gapping up, a gap up isn’t required. But a gap up is likely, since that would also test Sunday night’s 1148.00 high. This is a “new Globex trend extreme,” almost historically mandated to be retested intraday.

Reversing down from the 1148.00 Globex high’s retest would not reverse the trend down, not without also closing under 1138.25. The next higher target is then 1157.00-1159.00. Otherwise, an dip Thursday wouldn’t be credible unless it almost immediately broke under 1137.00.

Bottom line (My underlying premise)
If Thursday’s open isn’t gapping up or selling off, the 1148.00 Globex high could still be in-play. Its test would likely hold – and if pushed back hard enough, the test could form a durable top without leaving any unfinished business above.   [/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.