Trading Plan for 12/9
[pay]Pattern notes.
The afternoon’s rally extended 5 points beyond its 914’50 target. An attempt to extend higher didn’t come until after 3:30, timing that is already suspiciously late. It became obviously late when the blip-up blipped-down back into the range. Despite plunging to 901’50, the close recovered up to 912’75.
The morning’s 911’25 high was still being tested at the cash session close. The last ticks were 3-5 points below it, but the last 3-minute bars still printed it. A clean break either way would have helped to predict whether the rally was extending higher. Instead the close is at equilibrium, and Tuesday’s first trending attempt is likely to reverse equally in the opposite direction.
Equilibrium can be broken immediately by gapping beyond either a prior high or prior low, which in this case is essentially 896’00 or 918’50. I’ll probably have doubts about an initial rally attempt or the recovery from an initial drop, since the rally’s 910’50 target held its test through the close. Resuming the rally probably depends upon gapping up enough.
I’m still not convinced the past two sessions served any purpose other than to refuel sellers. A second consecutive breakout close above Monday’s 918’50 high would say otherwise. But the rally’s overly-optimistic origins, its aggressive nature, and its ultimate failure at a very relevant price, all suggest that this round of buyers is done – and that sellers will retake control if a new breed of buyers doesn’t announce its arrival by gapping up.
Indicators and Internals.
MACD & RSI diverged negatively at Monday’s late peak. The steep drop from there was sufficient to fulfill the signal. Then RSI deteriorated further after the cash session’s closing bounce was retraced. This tends to give Monday’s late sellers a lot of credibility. It’s possible they were initiating shorts, and not exiting longs.
Tuesday’s opportunities.
A couple of retail reports before the open are followed by a Home sales indicator at 10:00. This latter report’s timing tends either to accelerate or reverse any initial trending underway. If the two-day rally’s goal was to refuel sellers, then any probes of higher highs should be short-lived, and the morning should be exited in decline. Otherwise the next higher target is in the 933’00 area, whose test would probably include touching 940’00. [/pay]