Trading Plan for 12/16

If Thursday lows were so substantial… then why were they retested Friday? It wasn’t to enable Friday’s retest to launch a bigger rally. Instead, chipping away at the lows, leaving oversold RSIs outstanding, and then expending buying pressure for a bounce, these make a bottom difficult to maintain.

Pattern points… (Setups and technicals)[pay]
Friday afternoon’s sell-off that triggered under 1772.00 to 1766.00 recovered just enough early enough to rob sellers of their traction. That was back above 1767.00-1767.75. This recovery didn’t preclude sellers from regaining traction for a sell-off into the close. What’s interesting is that they didn’t even try.

In other words, during a 7-point bounce back up to 1773.00, only one reaction dipped any deeper than 3 ticks. Barely. Sellers did not expend any further energy after retracing the afternoon’s earlier plunge. A 4-point plunge into the position-squaring window was mechanical, and not opinionated.

So, Friday’s late weak-handed bounce had similar sponsorship to Thursday’s late drop, which was retraced entirely overnight. The position-squaring window’s reaction down was more similar to the retracement, and less a part of the late bounce.

Buyers expended all available energy without gaining traction for the effort. Patient sellers prevented the bounce from closing above relevant resistance. Despite preventing a close under Thursday’s lows, the burden of proof at Monday’s open is on buyers. Any immediate evidence of sellers taking control would be likely to trend down sharply intraday. But exiting the open above Friday’s highs would at least allow a bigger corrective bounce.

[/pay]What’s Next… (Outlook and opportunities)[pay]
We’ll go over this and other bigger picture elements at the Saturday Strategy Session. Its link can be found in the blog’s sidebar, and it starts at 9:30am ET.[/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.