Trading Plan for 12/15
Careful what you ask for. And don’t… Monday afternoon’s plunge was expected to recover fully. A recovery underway at Tuesday’s open didn’t end until probing Monday’s 1242.00 high. The recovery was expected to reach 1243.00, but stopped 2 ticks short. And then it plunged, too. [pay]
Pattern points… (Setups and technicals)
Tuesday afternoon’s 10-point plunge to 1233.00 was bigger than Monday’s 7-point plunge to 1235.00. But a late bounce recovered 1235.00. And 1237.00 was still being tested at the close. It was not clearly rejected, but the burden of proof is on buyers. And it was not clearly recovered.
1237.00 failed to hold as support at Monday’s close, too. It was the penultimate target preceding 1243.00. Closing below 1237.00 means buyers aren’t gaining traction, and that jeopardizes this leg meeting 1243.00. But it also makes 1243.00 likely to push back down hard if reached on this leg.
1242.50 might have sufficed for 1243.00 had Tuesday finished in negative territory. But the late bounce robbed the plunge’s sellers of their traction. Perhaps the sell-off was only temporary disappointment FOMC generated only tepid enthusiasm. Potential to test 1243.00 remains alive.
By the way, Tuesday’s shallow fresh high makes it easy to trigger a trend reversal. Tuesday’s new high made Monday’s 1235.25 low the rally’s last relative low. Closing under it would signal the trend had reversed down. Also, this being Wednesday of expiration week, any trending underway at the close is likely to remain underway through Monday morning. Trending not underway won’t likely start any earlier.
What’s Next… (Outlook and opportunities)
Extending Tuesday afternoon’s drop overnight would target a test of 1230.00 as support. It had better hold. There are no untested “lower prior highs” 1200.00. While that’s the likely resolution to testing 1243.00 anyway, testing 1243.00 first would be more appropriate. [/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.