Trading Plan for 12/22

They don’t make breakouts like they used to… Tuesday’s gap up extended higher on low volume, pretty much throughout the day. When it wasn’t extending, retracements were avoided by barely fluctuating. One two-hour stretch ranged 3-4 ticks total. Maybe that wasn’t really a breakout.[pay]

Pattern points… (Setups and technicals)
Tuesday’s late surge to 1251.25 was retraced in time to close the cash session back under the afternoon’s 1250.00 prior high. There is still potential for retesting the surge’s peak up to 1251.50, unless Wednesday gaps under Tuesday afternoon’s 1248.75 low.

Tuesday’s close is a breakout, being a new high, having begun the day by gapping up. Its low-volume warns that it will be proved false. As does retracing the late surge and closing back under the afternoon’s prior high. It is essentially an accident waiting to happen. But the breakout can stay in motion until acted on by an equal and opposing force.

Closing Wednesday back under the 1242.00-1242.50 prior highs would signal that opposing force had acted. Testing 1242.00 early enough might leave enough time to attract sponsorship for a recovery. Lightning would have to strike twice, since Monday’s intraday breakout was already retraced to 1242.00, and already recovered. Retracing another breakout likely wouldn’t bottom at 1242.00.

What’s Next… (Outlook and opportunities)
The gap back down to Monday’s 1242.00 close wants to be filled, regardless of its resolution. Just exiting the opening sequence back under Monday’s 1245.75 high would rob buyers of their traction, and all but require filling the gap back to 1242.00. There is plenty of downside potential if sellers gain traction to compensate for lost time.

Not dropping enough, early enough, nor for long enough, would at least avoid reversing down. It may even let the rally extend – probably through Thursday morning – even if only to test 1255.00.[/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.