Trading Plan for 1/17-18

1289-who? Friday afternoon’s bias-up target wasn’t even put into play until that afternoon. It was quickly met. It was the session high. And it was the cash session close. How attached can the market be to a level so recently introduced, and already retired?[pay]

Pattern points… (Setups and technicals)
1289.00 isn’t entirely new. It was the next higher target of a successful breakout. But Wednesday’s breakout wasn’t confirmed, so 1289.00 never was put into play. Smaller more recent patterns did target 1289.00, and it was triggered by Friday afternoon’s bias-up. But its relevance is otherwise fresh.

Closing at a target is “equilibrium,” and Friday’s close was at 1289.00. Closing above a target would put into play the next higher target. Alternatively, reacting down from a target to close under its prior low would indicate the target had held. But an equilibrium close – closing at a target – leaves no momentum to extend into the next session.

No momentum doesn’t equate to no volatility. Equilibrium closes tend to be very volatile the next day. Two or three intraday trending attempts, alternating in direction, with the last gaining traction. This jives with other templates for Friday’s breakout attempt:

1. A second consecutive breakout attempt, following an unconfirmed break, tends not to be confirmed either. Wednesday’s breakout wasn’t confirmed Thursday, forming a range. Friday’s breakout is the second consecutive attempt. The next day’s close is unlikely to confirm it. 2. Friday breakouts are seldom confirmed anyway.

Even after not confirming twice, a third breakout attempt – i.e. more new highs – is not unusual. The trajectory into last week’s close was too steep yet for its trend to reverse down. But an early trending attempt Tuesday is likely to reverse intraday back through Friday’s close in the opposite direction.

What’s Next… (Outlook and opportunities)
Monday’s holiday might impact the templates’ normal outcome. Ignoring the equilibrium close and extending higher uninterrupted would confirm Friday’s breakout. Its next target is the 1310.00 area. If the template were going to be busted, then 1310.00 could break higher and put into play 1321.00-1324.00.

Otherwise, intraday weakness should again recover from testing 1277.00-1279.00. Closing under it would target 1265.00, whose break would target 1234.00 and 1225.00.

Saturday’s Open House: My thanks to those that attended Saturday’s open house (recording linked here). We reviewed the broader market, individual stocks mentioned in this week’s Barron’s, and then too stock requests. I have a conflict with the next one’s timing, so we’ll move it forward to next Saturday, January 22. More info to follow…

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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.