Trading Plan for 12/18
[pay]Pattern notes.
The market was in striking distance of closing above prior highs Wednesday. This would have fulfilled the least likely of bullish scenarios. Perhaps the attempt was predestined to fail because the overnight pullback had exceeded its 895’00 limit – that was only overnight, so it got a benefit of the doubt. More likely is that the attempt failed because of optimists, who never let an inappropriate timing window pass unmarked by their impatient buying.
Still, the near-term trend has not yet reversed down, and the 100-point range of 815’00-915’00 (+/-) could persist into year-end. If so, the range would probably narrow, while continuing to firm, similar to Tuesday’s price action before the FOMC news.
Wednesday’s last-minute dip finally retested the gap’s open at 902’25, neutralizing an objective. Closing any lower would have allowed holding short into the Globex open. The same for not touching 902’25 but closing under 905’50. Instead it’s possible that Wednesday ended at equilibrium.
Equilibrium makes trending likely to be attempted, and likely to fail. We’ll assume that any trending attempt is doomed to failure and lean towards exiting a position if it meets a target while technicals deteriorate. If a target is exceeded, the equilibrium label will start to lose credibility.
The nearest resistance is 911’00 and support is 893’25. Breaks sustained beyond either would suggest trending is trying to emerge. That doesn’t mean more serious trending would succeed any more so than did Wednesday’s attempts.
Indicators and Internals.
Buyers can’t yet be counted out, especially since more NYSE down volume than up volume Wednesday produced more advancing issues than decliners. The ratio can be excused by the lateness of the afternoon’s drop. But the positive spread between issues flies in the face of a session spent almost exclusively in negative territory.
Thursday’s opportunities.
The econ calendar is heavy, with one report before the open, and two after the open. Friday is quadruple expiration, and price behavior might stray from the expected. In this environment, it matters less what one believes, so long as one does not believe it altogether (apologies to Oscar Wilde). [/pay]