Trading Plan for 1/29

If a valid bias signal isn’t rejected decisively… then it doesn’t matter how lethargic it was — it’s valid. And its bias target becomes “unfinished business” that requires being tested eventually. Which is why sellers never earned credibility Tuesday afternoon.

Pattern points… (Setups and technicals)[pay]
The burden of proof was always going to be greater for buyers Tuesday. Monday’s last-hour dive had retraced all of the bias environment’s gain, preventing its buyers from gaining traction for their effort. Without gapping up Tuesday, trending higher would be next to impossible.

The overnight rally from 1771.00 to 1786.50 expended as much buying pressure as possible without gaining traction for the effort. Its 11-point reaction down was recovered back up to Monday’s 1788.50 high before being knocked down again. A lot of buying pressure expended, but still no traction for the effort.

Buyers could have spent the time prior to Wednesday’s FOMC meeting more productively. Probing fresh lows and then recovering through the close to trap shorts, for example. But continually recovering to prior highs only expended buying pressure when it wasn’t going to gain traction for its effort. Again.

Wednesday afternoon’s bias-up signal did leave “unfinished business above” at a fresh high at 1791.00. Not that the bias environment was very productive, or at all. But its 1785.00 signal wasn’t rejected. Its target should be met at some point. Fulfilling it would be vulnerable to launching a new downleg, unless the target were exceeded through a relevant timing window that might protect it from the FOMC reaction.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Despite the close firming to fresh highs at 188.75, Tuesday’s buyers gained no traction for their effort. That’s because very similar to Monday, a late drop retraced the bias environment gains back into the noon hour’s range. A 3-1/2 point dip fell under the bias environment’s 1786.75 high — shallower than Monday’s 17-point plunge — but every bit as relevant. Probing above Tuesday’s highs Wednesday must being by gapping up, or else be likely to reverse back down later. Not gapping up could probe higher anyway, but only temporarily. Which would make sense ahead of the afternoon’s FOMC announcement. [/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.