Trading Plan for 1/18

Starting off the week with both… a bang, and with a whimper, the open gapped up sharply and the session sold off. It all developed above Friday’s cash session highs, but also under overnight highs, so neither buyers nor sellers gained traction for their efforts.

Pattern points… (Setups and technicals)[pay]
Tuesday’s close held 1288.00, whose break would have targeted 1285.50 and 1282.00-1283.25. There is also a requirement to retest oversold RSIs at Tuesday’s 1286.00 low. But while any or all could still be tested overnight, they could also be recovered before the open. So, no “hold-short through the close” was signaled.

A recovery would be motivated by the attraction to 1289.50-1291.50. Its relevance last week is already persisting into this week. Tuesday’s 1296.25 opening gap wants to be retested, too, and the 1302.50 overnight high is a “new Globex trend extreme” that requires an eventual retest.

But just failing to close above 1296.00 despite testing it suggests the context is distributive. Any rally efforts will likely fail, possibly while neutralizing attractions above. Testing the attractions below first would help fresh highs to extend, not with any requirement.

Gapping up Wednesday would leave outstanding the gap back to Tuesday’s 1289.00 close, if not also a retest of 1286.00‘s oversold RSIs. Regardless, gapping up Wednesday could still extend higher, for at least long enough to retest 1302.50.

[/pay]What’s Next… (Outlook and opportunities)[pay]
But for the lack of fresh afternoon highs, Tuesday’s session was “ineffectual optimism.” Gapping up, probing prior highs, ranging exclusively in positive territory…. but closing under prior highs and under the noon hour’s lows. Buyers expended a lot of energy, even during the post-open slide in avoiding negative territory. Strong-handed buyers don’t typically appear from out of nowhere.[/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.