Trading Plan for 1/20
[pay]Pattern notes.
Friday’s expiration session gapped up 15 points, fell to a 14-point loss, then recovered to close nearly 10 points positive on the day. Filtering out the noise leaves us with two probes above prior highs that weren’t maintained through the close. A probe under prior lows also wasn’t maintained, but buyers failed more opportunities than did sellers.
Expiration session characteristics tend to repeat the following day, and the Globex session surged 15 points to higher highs Sunday night, then fell 30 points into Monday’s 11:30am close. Buyers failed yet another opportunity, depositing S&Ps back where Thursday’s session closed. As if nothing ever happened.
Well, not quite nothing. Those failed rally attempts either chipped away at resistance, or else represent distribution. As evidence of the latter, it’s interesting that the latest failed rally was reversed down to close under three prior highs. That’s a big something, and not because it reveals a vulnerability to a bigger downleg. Rather, if buyers can overcome that much selling pressure, then quite a rally leg should soon be underway.
Sellers get a benefit of the doubt on any break under the 832’00 area. I don’t know what kind of trending – if any – to expect during inaugural ceremonies. If the ultimate resolution is down, perhaps this would be an excellent opportunity for yet one more failed rally. But be careful if one catches.
Indicators and Internals.
The decline since Sunday night’s open has essentially ignored three consecutive RSI positive divergences among both 1-minute and 3-minute. Despite the setups, price continued dropping after only the most obligatory bounces. Typically this means the market is in touch with more serious selling coming down the pipeline.
Tuesday’s opportunities.
Chart patterns for inaugural sessions aren’t very predictable. But it’s just as difficult for sellers to gain traction as it is for buyers. That said, sellers get a benefit of the doubt, at least early on. But if the range holds early on, then it should hold through mid-afternoon. [/pay]