Trading Plan for 12/27

Big things come in small packages… No, not what’s under the tree. I’m referring to 1252.00-1255.00 range from Wednesday morning into
Thursday afternoon. A brief probe below it recovered, and formed a bearish pattern described below. [pay]

Pattern points… (Setups and technicals)
Wednesday’s Double Top resolved down Thursday to test its 61.8% target at 1250.00. Simultaneously oversold 1-minute and 3-minute RSIs at the test’s 1249.00 low require its retest.

Its retest is likely to be done immediately, since the reaction up peaked at resistance. The bounce retraced 61.8% of the way back into Wednesday’s Double Top pattern. Similar to Wednesday afternoon’s bounce, potential pent-up buying pressure has already been neutralized. This suggests sellers will sponsor the next effort.

However, it does not mean sellers will gain traction. The Double Top’s 1251.75 interim low’s recovery was still being tested at Thursday’s cash session close. Its is irrelevant that futures extended higher. If anything, the post-close push higher suggests excessive optimism, which is bearish.

Potential to a fresh high cannot be ruled out before closing under a prior low. And potential to a fresh high cannot be ruled out simply for probing another fresh low. Retesting Thursday’s oversold RSIs at 1249.25 could prove very bullish if recovered back above 1252.00.

What’s Next… (Outlook and opportunities)
Last week’s new highs were a product of low volume. That’s not the traction of a durable rally. Nevertheless, recovering 1257.25 through a relevant timing window w signal the rally was extending to test 1262.75 and 1267.75.

Just recovering 1255.00 would set a bullish tone for Monday morning. Similarly, just failing to hold 1251.25 would set a bearish tone. Failing to hold it as support – or failing to recover it after testing Thursday’s 1249.25 low – would put into play 1244.50 and potentially 1242.00.[/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.