Trading Plan for 12/27

If Wednesday’s low is retested… then another rally attempt can form. But the rally would have no better chances than previously. Meanwhile, retesting Wednesday’s low would risk break lower into a new downleg.

Pattern points… (Setups and technicals)[pay]
Wednesday’s bias timing window through 10:15 ranged narrowly around 1423.00. That’s not an arbitrary level, nor was it an arbitrary window. So, the congestion there has an attractive quality that wants to be retested.

The ineffectual pessimism there — hovering just under the 1425.25-1426.00 gap back to Friday’s close — became pretty effectual, plunging to 1410.75. More so, oversold RSIs at the low require its retest.

Meanwhile, there is also ineffectual optimism suggesting that buyers are delaying the inevitable. Monday avoided a retest of Sunday night’s 1417.25 lows, undermining the interim rally. Now Wednesday’s momentary dip under last Monday’s 1412.00 opening gap has undermined its impatient buyers, too. That gap up had produced a fresh high, so there is no bullish reason to be revisiting it.

The rally need not resume. The gap back to Friday’s close need not be filled before a downleg gets underway. So, any further delay to an obvious decline would give a bounce new hope.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Extending Wednesday’s last break under 1416.50 to retest 1410.75 overnight before any consolidation could form the basis for another corrective bounce. Simply avoiding a recovery before Thursday’s open would keep the break’s momentum alive.[/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.