Trading Plan for 12/20

If Wednesday’s sellers were strong hands… then they should have produced more than an 11 point drop from the highs. That kept alive potential for deeper selling. For a moment, it looked like that would be delayed until Thursday. Then came the late dip to fresh lows, extending the drop to 15 points. Now Thursday could just as easily recover.

Pattern points… (Setups and technicals)[pay]
We knew to be suspicious of Wednesday’s pre-open buying pressure. Unfinished business above at 1444.50 had been satisfied, price had only firmed overnight and not resumed trending. Not reversing down through the bias-up signal, and not trending down through the opening 15 minutes would have been surprising.

The WedEx indicator was only passively bearish. A decisively bearish open Thursday would be more bearish, but still only passively.

Meanwhile, Tuesday’s close above last week’s 1432.50 prior high was not confirmed with a second consecutive higher close. Satisfying the session’s 1431.00-1432.00 pullback target without closing any lower does allow another bounce Thursday back to Wednesday’s 1444.50-1446.00 highs — especially on a gap up above 1438.00-1440.00. But there is otherwise room down to 1423.00 within the context of simply correcting the rally from last week’s low.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Don’t forget about the January Effect workshop, Thursday night in chartroom at 7:00pm ET. Click here for more info. [/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.