Trading Plan for 1/27

[pay]Pattern notes.
Monday’s gap up above 831’50 put into play 850’00-852’00. Does it matter the rally peaked 2 ticks short? Yes, and no.

YES. It matters so long as S&Ps are still within the target’s orbit. Monday’s retracement didn’t even break into negative territory. There is still potential for probing Monday’s high. Gapping up above last week’s 838’00 prior highs would put the retest back into play. Just opening flat would be likely to range sideways, but that would also include a retest of Monday’s high.

NO. Stopping 2 ticks short of 850’00-852’00 does NOT matter otherwise. The close under last week’s 838’00 prior highs indicates that buyers gained no traction. The door remains open to triggering another setup that puts 850’00-852’00 back into play – in this case, gapping back above 838’00 – but that setup must still be triggered. We’ll look at the bullish picture if 850’00-852’00 is exceeded.

Any attraction up to 850’00-852’00 becomes moot if Tuesday’s open were to gap down under 825’00, and extend and/or remain under 821’00 through the opening sequence. A break under 809’00-811’00 is still needed to officially signal a new downleg underway, but that should be only a formality after Sunday night’s dip there.

Indicators and Internals.
Oversold 1-minute RSI at Monday afternoon’s low helped to predict the gap back to Friday’s close would hold its test. Oversold 3-minute RSI improved one bar earlier to allow the bounce room to extend. But buyers never gained traction on that extension.

Tuesday’s opportunities.
Retail sales data before the open and Consumer Confidence afterwards will help to keep alive volatility. Although the FOMC meeting starts Tuesday, it shouldn’t inhibit price action because its announcement isn’t due until Wednesday afternoon. While gapping open either way would be predictive of one direction or the other, not gapping also carries specific implications.[/pay]