Trading Plan for 1/16

[pay]Pattern notes.
Thursday’s market did everything needed to trigger a steep rally. Probe important targets intraday, check. Attempt and fail a new low during the noon hour, while MACD & RSI diverge positively, check, double-check and triple-check. Recover the noon hour’s entry by 1:20, che…

Oh, wait, the noon hour’s entry wasn’t recovered until several minutes later. The timing factor normally becomes more important when the market faces abnormal influences like option expiration. Apparently not this time as S&Ps surge 28 points in less than 90 minutes.

Had the market staged this reversal through the open, it would have formed a near-term bottom. That may still be the case, but the surge left a lot to be desired because it left very little on the table.

The surge extended to 36 points a rally already underway off the low from two hours earlier. The aggressiveness was rewarding, but not rewarded, since the intraday probe of positive territory wasn’t maintained through the close. The probe of positive territory peaked upon testing Wednesday afternoon’s 846’25 prior high, the last downleg’s origin.

Expiration influences are somewhat accountable either for driving price too low to be maintained near-term, or for exacerbating the new low’s reaction, or probably a little of each. So long as expiration didn’t inhibit Thursday afternoon’s recovery and 846’25 doesn’t maintain an immediate recovery Friday, sellers are still very much in the game. Otherwise, they might not get another chance before next week’s inauguration.

Indicators and Internals.
3-minute RSI was overbought for the last 18 points of Thursday’s rally. The 1-minute diverged negatively for most of that time. It would be a tale of two markets, except there is only one, and it is conflicted. But so long as this is the case, then it is obvious that expiration influences are dominant.

Friday’s opportunities.
Thursday night’s Globex open gapped up and eventually probed the cash session’s highs. Rejecting the gain through Friday’s open would be the first signal that what expiration gaveth was being taken away. Declining Friday would also make Tuesday likely to drop. Maintaining early strength instead would target 866’00-869’00, but not necessarily higher next week. [/pay]