Trading Plan for 1/6
[pay]Pattern notes.
Monday’s session tried to answer several nagging questions, mostly revolving around last week’s low-volume rally. For instance, was it the product of speculators exploiting the absence of bigger monied participants? This would have meant its direction was counter-trend. What about Friday’s close above the prior month’s high? Its volume didn’t confirm it was any more than noise at the margin.
The first day back to real trading didn’t extend the rally. It wasn’t for lack of trying. A recovery from overnight losses did probe Friday’s high. And the reaction down from there tracked the template that called for rejecting a probe of new highs. But the afternoon’s 16-point drop avoided new session lows by 2 points because the morning’s low was pretty deep.
Monday’s session tried to answer these questions, and others, and failed. A bounce into the close nearly recovered positive territory, but didn’t. The session nearly qualified as a Pivotal Reversal setup, but didn’t. Sellers nearly took control with a negative close, but didn’t.
Monday’s ineffectual sell-off could be rejected by gapping up above Monday morning’s 931’50 high, and then quickly extending through its 934’25 session high. They’re both likely to be retested in some fashion anyway unless Tuesday’s open gaps under 917’00. Breaking Monday’s highs could renew the rally’s momentum for a 2-3 day run. Holding the highs’ retest would be toppy, but still lack the trigger for reversing momentum down.
Indicators and Internals.
RSI was suspiciously muted during Monday’s selling. The 1-minute repeatedly avoided becoming oversold despite otherwise productive selling bouts. The 3-minute’s first encounter with being oversold did produce a lower low, where its second encounter was quickly neutralized.
Tuesday’s opportunities.
Several econ reports due at 10:00 could accelerate or reverse any initial trending already underway. A probe above 931’50 should extend higher if 934’25 hadn’t yet been touched. Testing and already reversing back under one or both would likely react down sharply. Any other permutation would still have potential to rally further.[/pay]