Trading Plan for 12/12

Last reminder: Saturday’s Strategy Session begins at 9:30am. Its link is found in the blog’s sidebar.

Pattern points… (Setups and technicals)[pay]
Thursday’s close under 1240.00 signaled a trend change. As with all signals, it still required confirmation by closing under 1240.00 for a second consecutive day. Problem. Friday’s last touch of 1240.00 was during the morning’s bias environment.

Bigger problem. Futures ended Friday testing 1254.00.

Thursday’s signal can still be confirmed by proxy, essentially by triggering the signal again — and also by confirming it for a second consecutive session. One difference is that the second consecutive confirming session must actually trend down.

Breaking lower immediately through 1240.00 Monday could be credible for resuming the decline. It wouldn’t be difficult — the timing of Friday’s probes above 1248.00 all avoided a relevant timing window. Also, some portion of Friday’s rally was the product of covering shorts ahead of the weekend’s illiquidity. The bigger challenge would be in maintaining such a break, and then repeating it.

Otherwise, the door is open to filling the gap back to Wednesday’s 1259.00 futures close, and to retest Thursday’s 1266.00 pre-open high, neither of which requires a retest. But they’re retest following such a deep retracement could extend up to 1274.00.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Friday’s cash session close equated essentially to 1249.00. Post-close action jumped up to the afternoon’s 1252.50 prior high. That premium alone might have forced price down Sunday night, but then S&Ps spiked up to new session highs at 1254.00 before settling.This might absorb a lot of selling pressure, but a break under 1249.00 would be credible for extending down.[/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.