Trading Plan for 12/30

Wednesday’s session screamed higher roughly 3 or 4 points. I don’t know exactly, I lost track in all the frenzy. The last half-hour’s 3-point plunge was even more exciting. But not much more relevant.[pay]

Pattern points… (Setups and technicals)
Tuesday afternoon’s 1255.50 high printed before its last hour. Then it printed again during its last half-hour. The most recent instance had printed too late for its rejection of Tuesday’s last-minute dip to be relevant. Dipping any earlier Tuesday would have let Wednesday’s gap up trigger a “session-long rally.”

Wednesday behaved like a session-long rally, for the most part. Session highs printed during the last hour. But that was enough reward for rejecting Tuesday’s modest last-minute selling. So Wednesday wasn’t immune to a last-minute plunge that fell back to the morning’s 1255.50 post-open low.

Why rehash what almost happened? Because Wednesday afternoon’s 1258.50 high also printed well before the close, and also was touched again and again. But its sell-off began (barely) before the last half-hour. Rejecting it at Thursday’s open would be relevant. Gapping up above 1258.50 (circled green) would trigger a real session-long rally.

Almost all of Wednesday’s session developed above prior highs. Gapping down under Tuesday’s 1254.00 last-minute low (circled red) could form an Island Reversal. Its eventual retest would be likely, but not before attacking recent lows.

What’s Next… (Outlook and opportunities)
The low-volume environment could  spare us the theatrics of gapping up or down, and simply resume eking out higher highs. Both of Wednesday’s bias environments left unfinished business above at 1261.25.

Wednesday’s late plunge took RSIs to oversold. Until its 1255.00 low were retested, even if overnight, a bounce is doomed to failure. Bouncing first could form a significant top. And this pattern still has a large leg in-store, probably down.[/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.