Trading Plan for 1/5

New year, new format… I have incorporated various subscriber feedback to reorganize the daily outlook. My thanks to all for your input, which I always enjoy reading.

[pay]At the close (How the prior session ended)
Equally relevant to how the prior session ended is when. And where. The morning’s surge lost all momentum into noon, upon retesting last week’s 1128.50 Globex high. From there the afternoon only ranged narrowly within 2 points.

The highest upside objective had been neutralized, RSIs diverged negatively, and the morning’s bias-up had lapsed. None of which is a sell signal. A vulnerable rally is still a rally.

“Objects in motion tend to stay in motion, until acted upon by an equal and opposing force.”The afternoon’s narrow range was not opposition. A credible sell signal must break under Monday’s 1125.25 opening high. Any less of an effort would be likely to recover.

Pattern points (And technical influences)
Monday’s new high close looks like a breakout because it is above all prior intraday highs. A second consecutive higher close is required for confirmation, Even more so, since Monday’s close was still in the process of testing last week’s 1128.50 Globex high.

And since Monday’s close was still in the process of testing last week’s 1128.50 Globex high, gapping down at Tuesday’s open would leave no unfinished business above to prevent a decline. A sufficient gap down, like under Monday’s 1125.25 opening high.

The breakout attempt did avoid triggering a “Gotcha!” setup – probing prior intraday highs and yet closing back under the high close. This is another vulnerability that sellers failed to exploit – so far. Sellers can have a little more time to trigger the setup by immediately breaking back under 1123.00. But the rally will likely extend higher if sellers haven’t gained traction before Tuesday morning’s timing window lapses.

Bottom line (My underlying premise)
Narrowly ranging afternoons don’t often start trending from a standing stop. So, an early trending attempt would be suspicious, whether trying to extend Monday’s rally or retrace it. The burden of proof is on any trending attempt. Its sponsorship must offer evidence of like improving technicals, or breakouts maintained through relevant timing windows. Until then, the ranging may expand, but it will otherwise likely persist 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.