Trading Plan for 12/22
[pay]Pattern notes.
Thursday night’s initial slide attempted to reject the cash session’s last-minute 20-point surge. And it would have, if not for the automakers’ bailout. Reaction to the news turned a 10-point pullback into a 10-point gain. But this 20-point upleg was retraced almost entirely by noon. Then the overnight lows were probed int the last hour.
Friday’s opening surge finished a 61.8% retracement of the drop from Wednesday’s peak. The drop into Friday’s last hour chipped away at the 880’00 area’s support. A gap under 875’00-877’00 would be likely to extend down to 866’00-869’00 and 849’00.
It should be acknowledged that Friday’s quadruple expiration might have skewed things. The drop from opening highs might have been only expiration-related, and have contrary meaning. Back above 890’00-892’00 would suggest as much, and start to signal momentum reversing up. But this bullish scenario becomes undermined as any recovery is further delayed.
Indicators and Internals.
35% more NYSE up volume than down volume produced 65% more advancing issues than decliners. This relative productivity tends to be rewarded by some sort of bounce the next day, whether at the open or as a recovery from negative territory. This is waived if the next day’s open gaps under session lows. This setup isn’t a primary requirement, and neither is the Friday Factor. It points down during Monday’s opening 15 minutes, because Friday’s opening and closing 15 minutes both pointed down.
Expiration session trending is also a weak setup, but still tends to persist into the following session. So it is interesting that Friday’s price action trended down intraday, and to its lowest levels in its final minutes. Early rallying would be unlikely to extend higher before reversing down to lower lows.
Monday’s opportunities.
A holiday-shortened week might normally make things uneventful. I suspect not. Monday and Tuesday afternoon’s price action might normally become paralyzed from anxiousness ahead of the next mornings’ heavy calendars, but this will be a thinly-traded environment. And despite the session’s early close, even Wednesday morning has potential for volatility since its calendar is so heavy.
Holiday hours: Markets close at 1:00/1:15pm Wednesday afternoon, and re-open 6:00am Friday morning. Previously I said Globex re-opens Thursday night (Friday overseas). Nope, it re-opens Friday morning at 6:00am. I will monitor price action through at least 10:30, but not at all that afternoon.[/pay]