Trading Plan for 12/13

Friday’s rally was already suspicious…before Monday’s open gapped down under most of it to reject it. Now a similar question should be asked of Monday afternoon’s rally.

Pattern points… (Setups and technicals)[pay]
Monday’s close back under 1240.00 reinstates Thursday’s trend change signal. It has yet to be confirmed by a second consecutive lower close Tuesday, preferably under Friday’s ~1225.00 low.

A lot can happen before Tuesday’s close.

Monday’s bounce tested and reacted to resistance both at 1227.25 and 1230.50. It could extend further to 1234.00, or even test 1240.00 (although preferably not), before resuming the decline.

Monday’s open triggered a “session-long decline” setup that says the morning’s low must be broken. Normally that is done during that session’s last hour. The alternative is often at the following open. It is not a requirement, and its attraction to new lows will be irrelevant after Tuesday morning.

Ignoring the attraction below, and/or recovering to close above 1240.00, would have very bullish consequences.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Meanwhile, Monday’s sellers did not lose traction, since the late bounce did not recover above Thursday’s new relative low close. There is no requirement to bounce any further, and there was never any requirement to bounce at all. Back under 1227.25 and 1225.00 would start to reject it. New lows under 1221.00 would next target 1213.50. But above 1234.00 would be vulnerable to a bigger bounce.[/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.