Trading Plan for 12/21

Be sure to join us for the “January Effect” workshop… Thursday night at 7:00pm ET in the Chartroom. Click here for more info.

Pattern points… (Setups and technicals)[pay]
The premise going into Thursday’s “Goldilocks” session was that it wouldn’t be too hot, or too cold, but juuust right. An instant recovery of Wednesday’s drop from 1444.50-1446.00 wasn’t likely, nor was extending the drop. The morning could back-and-fill, trapping shorts to be squeezed for an afternoon rally.

So, the afternoon rally to 1438.50 (cash session close) and 1441.00 (futures close) was not inappropriate. Any no-bias trending above the afternoon’s 1436.00 bias-up signal was retraced. There is no unfinished business below.

But that’s no excuse for extending the recovery prematurely. Extending too much higher too quickly Friday could find buying pressure had been expended. Remember that this week’s WedEx indicator is passively bearish, so no further rally is even required.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Testing 1444.50-1446.00 at or near Friday’s open had better invalidate WedEx by extending to fresh highs. Similarly, another shallow morning dip had better be shallow. Otherwise, in either situation, a reversal down could start the ball rolling to retest Wednesday night’s 1427.25 lows. And lower. [/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.