Trading Plan for 12/31

[pay]Pattern notes.
We still have traction! And it’s still sellers. Despite recovering the overnight lows, buyers didn’t gain traction. Wednesday’s close did not recover positive territory. In fact, the cash session peaked several times at or just short of positive territory, throughout the day. It’s not as if buyers didn’t have the opportunity.

The entire session was essentially spent ranging in negative territory after gapping down. Combined with the low volume environment, this “ineffectual pessimism” cannot be counted on to resolve higher. An opening rally Thursday might not avoid being retraced entirely by the close – even if Tuesday’s 1128.50 pre-open high were retested first.

Meanwhile, since buyers didn’t regain traction, Thursday’s open is vulnerable to slicing through Wednesday’s 1118.00 intraday low, or gapping under it. Trending is still unlikely in this low volume environment, but a drop has room down to Wednesday’s 1113.00 pre-open low without breaking to new lows.

Indicators and Internals.
The opening peak’s overbought RSIs were eventually retested just after  the close to neutralize its attraction. Except for the overnight drop, RSIs only reflected buying. In this low volume environment, that means weak hands are optimistic, which is bearish from a contrarian perspective.

Thursday’s opportunities.
The year’s last influential news is Jobless Claims, due at 7:30. Its reaction will already be history by the open. A trending attempt isn’t required. And trending without news isn’t likely to get very far before volume all but disappears into the afternoon. If a morning trending attempt has stretched itself thinly, then the afternoon illiquidity could easily reel the market back to unchanged.[/pay]