Trading Plan for 12/23

[pay]Pattern notes.
Monday’s high was being tested as resistance at Tuesday’s close. Buyers once again didn’t gain traction, so there is no assurance of trending up Wednesday. Meanwhile, sellers did not gain traction, as shown by the trendline extending from yesterday’s pivotal and key highs (to either side of the actual high).

This is classic “ineffectual optimism” – Gapping up, probing prior highs and spending the entire session in positive territory, all without extending higher.

The illiquidity can cut both ways, as Newton’s first law of motion remains in effect. If something does spark enough trending to trigger a buy signal, then the path to its target should be uninterrupted.This week’s day-to-day gains aren’t different from the prior bounce. Its intraday rallies also failed to gain traction, and the pattern was also an accident waiting to happen. It did happen, retesting the consolidation at the low, much more dramatically than the rally had developed.

This current instance is so far only retesting prior highs, and not breaking out. So long as this is the case, the eventual retracement will be the beginning of the next downleg. Unfortunately for bulls, low volume does not a breakout make. In other words, higher highs might be probed, but volume probably wouldn’t expand to confirm a breakout underway.

Indicators and Internals.
1-minute RSI probed oversold territory at Tuesday morning’s 1110.50 low,while 3-minute RSI made its own lower lows. Its retest is likely. The 1-minute RSI diverged negatively into the afternoon’s high, which already pushed back. Most interesting, though, was the 3-minute RSI barely threatening to touch overbought or oversold intraday. This reflects the limited participation.

Wednesday’s opportunities.
The morning’s econ reports should offer at least one quick trading opportunity. But volume is already pretty thin, and Tuesday’s action shows how difficult it is to generate sponsorship for trending. Add to the mix that Thursday’s session closes early, for 3-1/2 days. Volatility might all but evaporate before noon Wednesday.[/pay]