Trading Plan for 12/2
[pay]Pattern notes.
Tuesday’s rally started from above 1095.00, instead of starting from under it. Instead of targeting 1101.00 where a drop would have been likely, Tuesday’s open leap-frogged over all of that resistance, and extended higher. The next major target was still tested at prior highs up to 1111.75, and it still held. But its test didn’t trigger the reversal that would have been likely by rallying from under 1095.00.
Wednesday’s price levels have changed, but the game remains the same. Rallying from under 1111.00 would target 1113.75-1115.00, where a drop would become likely. The similarity is due buyers failing to gain traction again Tuesday. Monday’s problem was that 1095.00 had held as resistance. Tuesday’s problem was the last hour’s price action being glued to the open’s 1108.50 high. Buyers aren’t gaining traction intraday, so the intraday gains depend upon gapping up.
There’s still time for optimism to get excessive before Friday’s Employment Situation report. There’s also time for a corrective dip that sheds sellers who might otherwise prevent a positive reaction. There’s still time for a lot of fluctuation having nothing to do with Friday’s report, and yet having everything to do with it – the market’s position at Thursday’s close will tell whether Friday’s news can be easily absorbed.
A lot of buying energy has been expended to rally straight up from Friday’s pre-open low. More energy was expended by gapping up Tuesday just to retest prior highs. Extending higher is possible, but it would be living on borrowed time. A pullback would refuel that energy, so long as the pullback wasn’t so deep that sellers gained traction.
Indicators and Internals.
RSIs were overbought during the formation of Tuesday’s high, 1-minute less so, at least enough not to require its retest. But 3-minute RSIs throughout the day did reflect a distinct tilt towards buying pressure.
Wednesday’s opportunities.
The flip side to “Buyers Ain’t Got Traction” is that sellers have none, either. There’s room down to 1102.50-1103.50 before they start gaining any. So, also similar to Tuesday, buyers will continue getting a benefit of the doubt Wednesday so long as the open isn’t gapping down too low. Meanwhile, a session-long rally would be signaled if the open gaps up enough, above 1111.00. Regardless, subdued price action is likely before the afternoon’s Beige Book reaction.[/pay]