Trading Plan for 1/26

That was quite a rally into Tuesday’s close. The price was right, along with timing, and eventually also technicals. Too bad it didn’t gain traction. Extending higher immediately isn’t likely to become a new rally leg. [pay]

Pattern points… (Setups and technicals)
A lot of selling pressure was satisfied at 1277.00. And it was satisfied at a relevant time, as the afternoon’s bias environment was starting to lapse. RSIs diverged positively on its retest to squeeze out the last drop of selling pressure.

Otherwise, the last hour’s rally was impressive.

Buyers had no active opposition. Their 11-point non-stop rally was very productive, recovering from session low back to session high. But it did not avoid a negative close. Its sponsorship gained no traction for their efforts.

Nevertheless, the burden of proof is on sellers. Until the last hour, they were in control. Gapping down, probing prior sessions’ lows, spending the entire session in negative territory. That’s a lot of pessimism. But probing the morning’s low only to close above the interim high is “ineffectual pessimism.”

Tuesday morning’s buyers were weak hands, because each rally attempt started too late. That context told us the rally attempts would fail and resolve in fresh lows. Tuesday afternoon’s buyers were weak hands, too. They face a similar fate.

But unless that suffering were obvious already at Wednesday’s open, then the door is open to probing fresh highs first. Then a resolution down to fresh lows.

What’s Next… (Outlook and opportunities)
An overnight or opening dip has room down to the 1283.00 area without sellers gaining traction. A recovery would target 1291.00, and possibly new highs above 1296.25 and higher. Back under 1283.00 would suggest sellers were already retaking control.  [/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.