Trading Plan for 12/20

If Thursday’s market wanted to confirm Wednesday’s “breakout”… then it had ample opportunity to do so. It didn’t. That doesn’t prevent probing new highs. But it makes extending to new highs difficult.

Pattern points… (Setups and technicals)[pay]
Wednesday’s surge was substantial, to put it mildly. That doesn’t rob it of the potential for being a breakout. Regardless of its degree, even the shallowest higher close Thursday would have confirmed the breakout had attracted strong-handed sponsorship. Then, regardless of any immediate reaction down, at least one more higher close would have been required.

Thursday did not close higher. Wednesday’s breakout was not confirmed.

It wasn’t for lack of trying. Despite gapping down and extending 10 points under Wednesday’s 1805.00 close, the afternoon bias environment’s high narrowed the deficit to only 3 ticks. The last hour’s entry narrowed it to 2 ticks. The position-squaring window actually touched 1805.00.

Each attack on 1805.00 reacted back down to at least 1801.50. Momentum did not reverse down.

Friday’s expiration may gap up or down or open flat. Thursday’s action did not rule out any opening scenario. Thursday afternoon’s 1807.75 bias-up target was left outstanding as “unfinished business above. And the bullish WedEX suggests that Friday afternoon will be biased upward — but not from any particular level, whether in positive or negative territory, or flat.

P.S. The SPX/Dow/NDX relativities are starting to diverge again. That preceded the last top, but was nevertheless predictive of the rally peaking. It’s not a sell signal, but a warning. I described it graphically at the end of Thursday’s Market Wrap recording.

[/pay]What’s Next… (Outlook and opportunities)[pay]
No hold-short or hold-long could be contemplated at Thursday’s close. And expiration’s wild card — quadruple witch, no less — only increases the post-close uncertainty. Being a Friday, the morning’s bias signal should persist through the noon hour. And being expiration, trending through the opening 15 minutes tends to persist through the day. [/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.