Trading Plan for 1/24

If Thursday’s drop isn’t duplicated Friday… then potential to new highs would remain very much alive. Otherwise, look out below.

Pattern points… (Setups and technicals)[pay]
The consolidation underway into Wednesday was going to break one way or the other before the close, or else by proxy at Thursday’s open. Breaking higher was likelier since the range’s upper-end was much nearer. Breaking lower would have required too much time for complex trending to develop. Gapping down below the range would have worked, but… that rarely happens.

Anyway, it happened. The template being tracked remained intact, where extending the range would have been problematic. Now the question is whether Thursday’s sell-off expended enough selling pressure for a recovery to new highs. The 1813.75 low did fulfill a lot of selling pressure, although that did bottom 2-3 ticks too optimistically to be confident.

Not being ready to recover doesn’t preclude a Friday morning bounce to refuel sellers. “Higher prior lows” at 1834.00 are the minimum resistance to suggest a bigger rally underway. Even probing several points higher could still reverse down. Meanwhile, having rallied into Thursday’s close, gapping down Friday under Thursday afternoon’s 1813.75 low could form a “session-long decline,” no refueling needed — just crash helmets.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Thursday’s cash session close was still testing 1821.50, and the late probe above it was too late to be its recovery. Almost any dip back under it overnight would be credible for extending down into the open. This being a Friday, that may be the only path to new lows for the week, since trending rarely waits until the afternoon to begin. Rarely. Like consolidations rarely gap down from their upper-end to below their lower-end. [/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.