Trading Plan for 12/31

If Friday’s post-close plunge was weak-handed… then Monday’s open should be very obviously bullish. Friday’s plunge was so substantial, that not rejecting it by Monday’s close would have implications that impact the market for weeks to months. It could be rejected at Monday’s open.

Pattern points… (Setups and technicals)[pay]
There is a bullish scenario. After plunging 18 points from Friday’s cash session close, which was already down 14 points from Thursday’s close, it is possible that all available selling pressure has been expended.

The drop’s sponsorship is new, a trend change signal was narrowly avoided, and two more nearby attractions were neutralized at 1390.00-1391.00 and 1383.50. Add to it that the post-close selling may have been triggered by leaks from the fiscal cliff talks that were ending without accord, a “knee-jerk headline reaction” on steroids.

Of course, new lows are not a buy signal.

Monday’s opening print must reject the late drop to avoid more downside or delayed recovery. My pre-close comments are no less pertinent after the 18-point post-close plunge. Trending going forward is an either/or proposition — either bottom on Monday, or begin the big downleg.

[/pay]What’s Next… (Outlook and opportunities)[pay]
I’ll describe this in detail with charts during the  “Saturday Strategy Session.” It’s at 9:30am ET, and linked from the blog’s sidebar. Any last-minute year-end stock jockeying that you need can be addressed there. [/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.