Trading Plan for 12/16
[pay]Pattern notes.
Monday’s close above 1106.50-1107.50 could have been a breakout of the five-week trading range. But it was disqualified by the afternoon’s narrow range. That was already known, but it was underscored by Tuesday’s gap down back under 1106.50-1107.50. This action also predicted Tuesday’s close would be under 1106.50-1107.50.
This confirms the ongoing pattern isn’t accumulative. It was underscored by the intraday bounce peaking after filling the gap back to Monday’s close. In the first instance, a probe of resistance wasn’t recovered through the close. In the second instance, unfinished business was neutralized first.
All of this follows the characteristic common among Thursday, Friday and Monday’s sessions. Their opening gaps up each ended the day without gaining any traction. When price rises anyway, it is an accident waiting to happen. When it happens, the week-long bounce is should be retraced quickly. Regardless, the accident wasn’t likely to happen Tuesday.
This seemed dubious when Monday’s low was probed, but Tuesday’s last-minute 5-point bounce did retrace it. Barely. The drop may have been exacerbated by news coming from the fluid healthcare legislation process – Tuesday’s peak and drop seemed in lock-step with the news. If so, then Wednesday’s open should immediately recover much more lost ground. Otherwise, there’s now room down to 1099.00 before sellers gain traction.
Indicators and Internals.
RSIs weren’t at all shy about getting overbought or oversold Tuesday. Overbought RSIs at the morning’s 1109.50 high make its retest likely. Oversold RSIs at the last-minute low don’t require a retest, since they were the product of a retest. But a positive divergence on their retest would be interesting as a buy signal, and even more interesting if ignored.
Wednesday’s opportunities.
Three econ reports due simultaneously before the open. A volatile open would help to trigger morning trending. If 1106.00 is part of the equation, then testing it as support from above after an overnight rally would be bullish – it that overnight rally had not already retested Tuesday’s 1109.50 high. Waiting until the open before attacking 1106.00 would be likelier to reverse down. A break maintained under 1099.00 would give sellers traction, but how much traction can they get before the market becomes paralyzed by anxiousness ahead of the afternoon’s FOMC news. [/pay]