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Trading Plan for 1/2 – If, Then… Market Timing

Trading Plan for 1/2

By Rod David | January 2, 2009 - 1:19 am

[pay]Pattern notes.
Are prices about to come back down to earth? The highest target for the past two weeks has been 892’00. It hasn’t even always been in-play. But one thing led to another, and eventually Wednesday’s session extended up nearly 20 points from its open around 892’00. But it all evaporated before the weekend.

The cash session close equated to 904’00, just 4 points off the high. Fifteen minutes later, the futures session closed 2 ticks under 892’00. Does it count? Does closing back under the 892’00 target, after having probed it repeatedly, extensively, and substantially throughout the day, does closing back under 892’00 say that that the target held as resistance so a downtrend can begin?

  • Yes, and no. The last-minute drop does forge the way for sellers Friday, but it doesn’t require them to act on it. The gap back to Wednesday’s cash session close will want to be filled, but need not.
  • Yes, and no. The deeper and deeper probing of 892’00 all occurred on the year’s last session. Influences other than accumulation or distribution were at work, so the probes were artificial.
  • Yes, and no. Where breaking back under 886’50 through 880’50 would put sellers back in control, recovering from any of these levels would at least retest Wednesday’s high.

Wednesday’s 908’00 high is a line in the sand, and to close above it would buy the rally another upleg. Retetsing 908’00 and then closing back under 892’00 would simply trend down. Accumulative and distributive efforts won’t be so prevalent during Friday’s stand-alone session, but it’s still a light volume day. So instead of false starts and stops, early trending will be likely to persist well through the noon hour.

Indicators and Internals.
MACD & RSI didn’t became overbought until the mid-afternoon attacks on 905’00. They were not bullish at Wednesday’s last-minute high. And only 3-minute RSI because oversold into the post-close drop.

Friday’s opportunities.
Wednesday’s last-minute dive did some major damage to the intraday chart. Friday’s open is free to ignore the plunge and simply open back up towards Wednesday’s highs. That’s a lot of ground to cover, so assuming it isn’t, I would become open to shorting if 901’00-902’00 is tested as resistance. And under 888’50 should put Wednesday’s highs out of reach.[/pay]

Posted in Market Wrap, S&P