Trading Plan for 12/12
[pay]Pattern notes.
It took awhile for Thursday’s ranging to finally capitulate. Despite the mid-day teasing at potential probes of higher highs, there wasn’t much doubt which way the pattern would resolve eventually. The morning and overnight lows were overly-optimistic, equally optimistic to every prior bounce that had retraced entirely.
The same can be said for the week on whole. The capitulation has taken awhile to arrive. The mid-week teasing at higher highs never outweighed the expected eventual resolution. And last week’s lows were overly-optimistic.
Thursday afternoon’s drop left a target in-play at 865’00. That allowed its magnetic attraction to help resume the decline Friday. Had the target been met Thursday, then it might have served as a bottom. Well, it is being met Thursday – after the close, in a gap down on BAC layoff news. In fact, 858’50 is being tested.
Friday’s session is still vulnerable to open by repeating Thursday afternoon’s drop, which essentially means down towards 850’00 near the open. Gapping down there and extending under 846’50 could slow the next 11 points of descent down to 836’50, but any lower could reach under 800’00 before the close.
The bullish scenario would recover above 876’50, and extend higher to 887’50-890’00. That would either delay a bigger day of reckoning, or give buyers a chance to gain traction for resuming the rally. Good luck with that.
Indicators and Internals.
Thursday’s potential for a short-squeeze was undermined by several factors. One was3-minute RSI’s shallow bounce when S&Ps first tried bottoming near session lows. By the time RSI could dip again from positive territory, it was too late for a short-squeeze to form. Relentlessly oversold might make a market vulnerable to bouncing, but not sustainably, and meanwhile more vulnerable to resuming the decline at an accelerated pace. Things aren’t looking any better as the Globex open ticks lower…
Friday’s opportunities.
Fridays tend to extend the open’s trending well past the noon hour. If the open gaps down sharply but doesn’t extend lower, then the balance of the morning could bounce as sharply or more. But first things, first…
S&Ps are probing lower lows now,90 minutes past the Globex open. There is room several ticks lower to test 857’75 before targeting 850’00 down to nearly 846’50. But back above 861’00-862’00 would rob sellers of their traction, and at least extend the ranging back up to 865’00.
An auto bailout bill vote possible overnight. Two econ reports at pre-open and another two after the open. Then a weekend of illiquidity ahead. All being prefaced by a 15-point follow-through from a 25-point loss. Should be an interesting session.[/pay]