Trading Plan for 12/9

Wednesday’s market was down for the count… It did fluctuate into positive territory. In fact, most of the session traded positive. But buyers never gained traction intraday, despite holding tests of prior lows, after the prior day’s steep drop from new highs. This is not exactly “resilience.”[pay]

Pattern points… (Setups and technicals)
Tuesday afternoon’s dive damaged the chart, leaving only limited bounce potential for Wednesday. And the bounce target’s test pushed back aggressively. But not permanently.

The 1228.00-1228.50 bounce target’s opening test pushed back to 1219.00. The bounce target’s retest when the afternoon’s bias environment lapsed also pushed back, but less so. It was tested once again at the close.

1228.00-1228.50 was thoroughly tested, and it held as resistance through all relevant timing windows. Its latest recovery makes a higher high likely – more than just to 1230.00 which was probed after the close. But a higher high should be temporary, and its rejection should be permanent.

No higher high is required, as there is no unfinished business above. The pattern is unusually vulnerable to suddenly launching another downleg that is steep and substantial. Wednesday’s late trading came dangerously close to triggering it. Wednesday morning’s 1217.00 (basis Dec, 1212.00 basis Mar) bias-down signal is still owed a test, and its unfinished business would be the next lower objective.

What’s Next… (Outlook and opportunities)
This market isn’t going to sit still and range narrowly. If it’s not bouncing, then it has resumed the decline. Ranging sideways narrowly isn’t likely. A bounce has potential to 1231.50 or to 1234.00 (basis Dec, 1226.50 or 1229.00 respectively basis Mar) . The true target should react down sharply.

The bounce target can be met overnight. It can also be rejected before Thursday’s open. In case of an overnight bounce, not opening in negative territory after testing 1231.50 would make 1234.00‘s test likely (basis Dec, 1226.50 or 1229.00 respectively basis Mar).

Gapping up above 1233.00 (basis Dec, 1228.00 basis Mar) would be a variation of a “session-long rally” setup. Gapping down under 1224.00 (basis Dec, 1219.00 basis Mar) would qualify as the “session-long decline” setup. [/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.