Trading Plan for 1/21

[pay]Pattern notes.
Tuesday’s drop did a lot of damage to the chart:

• Its opening gap down extended under all prior relative lows in time to signal a session-long decline.
• Fulfilling the session-long decline signal with a session-long decline makes lower lows likely at some point the following day on Wednesday.
• Tuesday’s close was under last week’s prior relative lows (red highlight), confirming last week’s break under December’s prior lows (blue highlight).
• Tuesday’s close was also under December’s lows (green highlight), which had been the Thanksgiving rally’s first reaction low.

Having done so much damage to the chart, sellers have bought time and room for a corrective bounce to refuel. There is no requirement to bounce, nor is there any specific timing – whether completing overnight, or not beginning until probing new lows intraday.

A bounce was already being attempted into and out of Tuesday night’s Globex open, from 797’50 to 813’50 as of this writing. Its potential is 819’00, so long as pullbacks hold any test of 810’00 support.

Indicators and Internals.
RSI is doing something overnight it did only grudgingly intraday, actually becoming extended. In this case it is overbought. The underlying strength it reflects doesn’t add credibility to the bounce’s potential, but it does make the first sell-off attempt likely to recover at least once.
Wednesday’s opportunities.
Retail econ reports are due before Wednesday’s open. The overnight bounce ensures some sort of reaction, regardless of whether the gain is maintained into the news. So long as the mood hasn’t inverted overnight, Wednesday morning’s objective is likely to focus on finding short-entry opportunities.[/pay]