Trading Plan for 12/10
[pay]Pattern notes.
Monday’s close predicted equilibrium through at least Tuesday morning. Its influence lasted through the noon hour. The afternoon’s drop to new session lows at 885’00 was a singular leg. It was retraced by a single bounce up to 900’00 where almost any higher would have triggered a short-squeeze. Instead buyers balked, and the bounce was retraced back down to session lows.
The market couldn’t dig its way out of negative territory. The rally reached almost high enough, at the right time. And the rally’s opposition was ineffectual sellers who could only retest the low but not break it. Buyers can still retake control, but not meekly.
Gapping up above Tuesday afternoon’s 900’00 high would favor buyers, confirmed above 904’00. I would give this a benefit of the doubt for resuming the bear market bounce up to 933’00 and 940’00. Gapping above 904’00 would leave less upside on the table, but it would have more momentum behind it, making a more compelling long-entry.
There isn’t much required of sellers to control Wednesday’s session. They need only to extend the afternoon’s decline under 886’50 without any further delay. The gap back to Friday’s close in the low 870‘s would be targeted initially, probably down to 868’50. But since Monday and Tuesday never extended meaningfully, filling Friday’s gap already would suggest a retest soon of Friday’s low.
Indicators and Internals.
Both 1-minute and 3-minute MACD & RSI diverged positively into the afternoon’s retest of session lows. Each had already gotten overbought in the interim. While this setup tends to resolve up, that’s more often the case when resolving in the same session. Regardless, its resolution should begin by gapping either above a relative high or under a relative low.
Wednesday’s opportunities.
Gapping down a little would resume Tuesday afternoon’s decline and its target 20-23 points lower. Gapping up a little or a lot would still find plenty of resistance above to slow or stop it. The better recovery attempt would gap up and extend higher with little if any delay – the goal being to create a wide buffer to absorb a pullback. So the easier it is to buy a strong open Wednesday, the less attractive it is. [/pay]