Trading Plan for 12/5

If Monday’s decline were bearish… then Tuesday should have extended it. Probing lower lows doesn’t qualify, not when interim bounces kept returning to Monday’s “higher prior lows.”

Pattern points… (Setups and technicals)[pay]
The most bullish thing about the market after Monday’s close was the unfinished business it had created above. After Tuesday’s close, it may be that sellers failed to extend Monday’s decline. Not for lack of trying, which is also bullish, since that means sellers were weak hands.

Still, buyers have yet to capitalize on those failed sell-offs. At least, not yet. It’s not required the same day, so the pressure is on Wednesday’s buyers to put up, or shut up.

Since buyers gained no traction Tuesday, extending higher Wednesday would all but require gapping up. Sellers gained no traction either, so extending Monday’s drop should begin by gapping down. Not gapping would be unlikely to trend at all. So, Wednesday’s intent should be obvious before the open.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The market has begun trading as if it is waiting for some other shoe to fall. The question is, which other shoe? Jobs data will start creeping in, as we head toward Friday’s Employment Situation report. Eurozone headlines are triggering less reaction. Fiscal cliff “negotiations” have leaked out sporadically. Perhaps the question is from what level will the news hit. [/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.