Trading Plan for 12/29

The flat close masked the morning’s wild swing. But the morning’s swing was wild only because it reversed into negative territory from new highs. Ranging is still otherwise subdued. [pay]

Pattern points… (Setups and technicals)
Monday afternoon’s narrow 2-1/2 hour range wasn’t going to launch a durable rally. That didn’t mean it couldn’t try, which it did. In the process, it neutralized unfinished business above at last Wednesday night’s 1255.75 overnight high.

Gapping open above prior cash session highs created new unfinished business above. Price would have been attracted back up to 1255.50 another day. But Tuesday afternoon’s rally already filled the open’s gap and neutralized its attraction. Closing back under prior highs was almost as bearish at that stage as closing negative.

Impatient buyers neutralized pent-up buying pressure that could have assured a rally the next day. Similar action the prior three sessions (depicted in yesterday’s chart) sold off the next day. Tuesday also neutralized all unfinished business above.

By the way, a new landmark was established due to Tuesday’s new high. Since the interim low was Monday morning’s dip. Now closing under Monday’s 1247.00 low would signal the trend reversing down. Sunday night’s 1245.50 low would confirm.

What’s Next… (Outlook and opportunities)
Recovering intraday dips can resemble accumulation. But it’s just buyers expending energy if the effort doesn’t recovery above a relevant level. It is distribution if the recovery probed a relevant level intraday without closing above it. Even then, it’s not a sell signal – this routine can repeat indefinitely. And avoiding a downleg Wednesday morning would target at least an intraday probe of new highs.[/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.