Trading Plan for 12/21

Monday’s low fulfilled a big, BIG target… This, we already knew. Without any other refueling, a rally began immediately overnight and extended higher throughout Tuesday. Wednesday’s close could predict even more to come, or a reversal back toward the lows.

Pattern points… (Setups and technicals)[pay]
Clearly, Tuesday’s rally expended a lot of energy. A lot of energy had been expended already before Tuesday’s open. That is not a sell signal, nor does it prevent extending higher.

The question is whether the buying pressure gained traction for its effort. It is possible to be too productive. Probing a resistance without also closing above it robs buyers of their traction. Closing above a probed resistance gains traction.

Tuesday’s intraday rally tested several relevant resistance levels. The opening 15 minutes peaked at 1227.25, the noon hour tested the afternoon’s 1231.00 bias-up signal, and the last several minutes probed the 1236.75 bias-up target.

1236.75 was the proverbial bridge too far, since its reaction closed back under the two prior highs. Leaving no unfinished business above, buyers gained no traction for their efforts.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Sellers never gained traction either, so the rally can try to extend Wednesday — but extending a rally without traction essentially requires gapping up. Higher highs would target the 1244.00-1246.00 area. A pullback has room down to 1231.00 before targeting Tuesday’s 1227.25 opening peak.[/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.