Trading Plan for 12/14

[pay]Pattern notes.
There’s now a five-week long range defined essentially between 1082.00-1107.00 (green and pink highlights below). Last week offered yet another tour of chipping away at the range’s support, only to recover back to its upper-end.

That’s not entirely accurate. The recovery was a little shallow, actually. Not only was the upper-end missed by about 2 points Friday, it was also under-served in Monday’s attack. This seems like buyers missing an opportunity to break higher, and it is. It also reflects pessimism for sellers lacking patience, which might have let buyers trap themselves upon probing higher highs.

 

Coupled with Tuesday’s gap down, perhaps Monday’s relatively shallow bounce is why selling pressure failed yet again to break under the range’s lower-end.  It’s not as if there isn’t unfinished business below at 1074.00 and 1062.00 (see chart above).

The prior Friday’s low (red block) was recognized at the time as being unsustainable, and Monday’s bounce only added to pent-up selling pressure. But that became moot when it was probed Tuesday. Its gap down didn’t break the range’s lower-end, and neither did Wednesday’s ranging. Their mirror image was Thursday’s gap up and Friday’s ranging.

This range has just been one case after another of missed opportunity. Missed opportunities aren’t distributed evenly, and anyway it wouldn’t be predictive. The current opportunity is a breakout triggered above 1106.50-1107.50, targeting either 1148.00-1149.00 or 1182.00-1184.00.

Such a breakout attempt could become the most recent missed opportunity – especially if the breakout’s character were explosive, and then also confirmed by a second consecutive higher high. Breaking back under 1096.00 at any time would offer another opportunity for breaking the range’s lower-end. Or to miss.

Indicators and Internals.
RSIs diverged positively simultaneously at Friday morning’s low, offering excellent notice of a bottom. No unfinished business remained outstanding into the weekend.

Monday’s opportunities.
No econ reports are due Monday. The FOMC meeting begins Tuesday amid several news items, and the interest rate decision will come after several more metrics are released on Wednesday. Trending attempted Monday before the news, before the decision, could very well be counter-trend. That is, in the direction opposite to the pattern’s ultimate resolution. And trending is likely to be attempted early.[/pay]