Trading Plan for 12/2

Wednesday’s narrow sideways ranging, through multiple timing windows, reflects a market that is comfortable with its pricing. That tends to be self-fulfilling, until it’s not.[pay]

Pattern points… (Setups and technicals)
But for one brief surge (highlighted green) between timing windows, Wednesday’s session only ranged narrowly. Two or three consecutive narrowly ranging timing windows make another likely. Thursday’s open might gap up or down, or not at all. Regardless, its timing window (i.e. Thursday morning) would then be likely also to range narrowly sideways.

Extending higher without delay, and not ranging narrowly, would suggest patient buyers were giving overly-optimistic buyers more rope. Rallying into and out of Friday’s Employment Situation report is possible, but not likely in this pattern.

Ignoring Wednesday’s distribution in order to gap up or trend higher would confirm the three-week old decline had ended. But Wednesday’s rally left unfinished business below: the gap back to Tuesday’s 1179.50 cash session close, and oversold RSIs at Monday’s 1172.25 low. And Wednesday’s rally emerged from a “Complex Triangle” (described here Monday).

A pullback Thursday could still be absorbed to refuel the rally for a positive reaction to Friday’s Employment Situation report. Extending higher wouldn’t necessarily be bearish – at least, not necessarily immediately.

What’s Next… (Outlook and opportunities)
Gapping up only to 1209.00 might not be far enough away from Wednesday’s range to avoid reversing back down. But its recovery would put into play 1217.00, and its recovery would target new highs at 1228.00.

A gap down has room to 1199.00-1201.50 without triggering a bigger downleg. Even then, a bigger downleg would target 1189.00-1190.00, and could refuel another upleg targeting 1228.00.

Thursday’s jobs data can either reinforce Wednesday’s strong ADP report, or disappoint. Neither would leave much upside for the afternoon while awaiting Friday’s Employment Situation report.  [/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.