Trading Plan for 12/17

[pay]Pattern notes.
Wednesday morning’s 1111.75 high stopped 1 tick short of touching the overnight high. But that was enough to probe prior intraday highs, and the prior highs held. The prior highs held their probe, once again closing back under 1106.50-1107.50.

This follows several consecutive sessions of gaining no ground intraday despite gapping up. In fact, Wednesday’s close was under Monday’s 1108.50 high close, after probing Monday’s intraday high. At least one interim session developed under Monday’s high – actually, just one session, Tuesday – forming a “Gotcha!” setup.

The setup is not ideal, since the Dec 4 actual high wasn’t also probed. It’s enough to predict an immediate drop at Thursday’s open, but an immediate drop at Thursday’s open would be expected to extend down sharply.

Meanwhile, Wednesday’s session developed under Dec 4’s prior high. So a probe of Dec 4’s 1114.25 high, and then a close back under 1108.50, would also form a Gotcha. In its ideal form.

Indicators and Internals.
3-minute RSI suggests sellers paced themselves well during Wednesday afternoon’s decline. Flirting with oversold territory, but never probing it, while continuing to decline – this doesn’t leave unfinished business below, but there’s no near-term opportunity to diverge positively.

Thursday’s opportunities.
The trick to forming a top is trapping buyers. It’s a trick because it involves letting them get into position to gain traction. So the first part of a top resembles a breakout. You know what else resembles a breakout? A breakout. The econ calendar seems tailor-made for just such a reversal. Recovering 1109.25 through a relevant timing window would make a rally credible until proved otherwise. Sellers would start regaining traction by ejecting any opening gain, or breaking under Wednesday’s lows.[/pay]

PROGRAMMING NOTE: We tested the new chartroom platform Wednesday, and will continue testing it Thursday. Assuming no surprises, it will be the default destination beginning Saturday. In that case, I will announce a time to meet over the weekend to get acquainted with its controls. If you’re using Windows 7 or Apple Mac, please try accessing the room now (at this link) to confirm its compatibility.