Trading Plan for 12/12

If I can update the blog mid-morning… then I will. But it won”t be in the Chartroom. And the odds are against it. First Trade may be Friday”s only communication. Of course, this is shaping up to be a very interesting day.

Pattern points… (Setups and technicals)
Thursday morning”s surprisingly gargantuan rally was contained to the bias environment. Its interim peaks and ultimate peak were extended measurements of the likelier setup, which was to gap up only shallowly before reversing down sharply.

Declining 25-26 points from the post-open high wasn”t inappropriate for the setup going into Thursday. Just not from such a high post-open high. 

Now the question is whether the sizable morning rally created room to absorb sellers so they couldn”t damage the chart that afternoon. I don”t think that”s the case, because they left outstanding a gap back down to Wednesday”s close that must be filled eventually. And the afternoon”s selling prevented Wednesday”s trend change signal from being invalidated.

Also, sellers gained traction for their efforts Thursday afternoon. The bias environment was exited under the noon hour”s low, and the final hour was entered under the bias environment”s low. Wednesday”s sellers gained traction similarly for their effort, so take that with a quarry of salt. Nevertheless, that”s two consecutive sessions of distribution.

The session gapped up, probed relative highs, and traded exclusively in positive territory (even after dropping 25 points from the high). But the morning”s high wasn”t extended, suggesting the session was “ineffectual optimism.”

All of those reasons to be bearish. All of those doors opens to reversing down. If the market can”t be bothered with a single one of them through Friday”s open, that might be because it intends to rally sharply into the weekend.

What”s Next… (Outlook and opportunities)
Don”t forget about the Saturday Review at 9:30am ET Saturday. Thanks for your indulgence during this travel day. We”ll catch up Saturday morning. Two consecutive afternoons of distribution, I envy you…