Trading Plan for 1/2

HAPPY NEW YEAR’S!… Best wishes to you as the old year passes, and the new one begins.

Pattern points… (Setups and technicals)[pay]
There’s no arguing with the 35-1/2 point rally from Monday’s pre-open lows. Friday’s tests of 1383.50 and 1390.00-1391.00 appear to have been relevant. Testing them after the close instead of intraday helped to identify sellers as being weak-handed.

Monday afternoon’s last rally leg was similar. Its 1422.50 target was tested at the cash session close.Any probing above it — to nearly 1426.00 — was post-close, and weak-handed. Buyers expended all available energy without putting into play any higher objective.

Of course, new highs are not a sell signal, just as on Friday, new lows were not a buy signal. There must first be a reversal signal. That is at least under 1413.50, with room down to 1403.00 before suggesting a bigger reversal underway.

Otherwise, new sponsorship is needed to extend the rally higher. That can come from refueling buyers with a dip, or by impatient buyers forcing a gap up. Near-term resistance at 1431.00 or the 1440.00 area need not be met, but the resolution to their test(s) would be telling.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Globex does resume trading ES until 6:00am ET Wednesday morning. Friday’s close discounted the weekend’s (lack of) progress in fiscal cliff negotiations. We should know with Europe’s open(s) whether Monday’s close discounted interim developments. [/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.