Trading Plan for 1/4

I think volatility is back. S&Ps up 18 points from Friday’s cash session close, giving back 6 points of it through the afternoon. And this stage is just the market stretching. [pay]

Pattern points… (Setups and technicals)
The retest of last week’s 1258.50 high was fulfilled. Two pieces of unfinished business above were neutralized easily at 1259.25 and 1261.25. And than some. The intraday rally extended to 1272.50.

1261.25 was Monday morning’s bias-up target, but it was never touched intraday. Not directly. The next higher target was 1266.75, and Monday’s close was in the process of testing it as support.

Price slipped further to 1264.50 after the close (circled red). Since 1266.75 is a 61.8% retracement of the intraday range, closing under it would have argued for holding short through the close.

Trending down low enough overnight would form an Island out of Monday’s range. Had that extra slip come sooner, then overnight action would have been predicted to trend down. It’s still possible, but retracing more after the cash session close usually just creates a slingshot effect back up.

What’s Next… (Outlook and opportunities)
A slingshot back up would target 1268.00-1269.00. Any higher would target a retest of Monday’s 1272.50 high, though no retest is required otherwise. Monday’s session was rife with optimism. The post-open shallow pullback stopped 1-2 ticks short of the 1262.00 buy signal. And two bias-up targets were exceeded through the open. Reacting down from a bounce to 1268.00-1269.00 would point down through the morning.[/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.