Trading Plan for 1/7

[pay]At the close (How the prior session ended)
Wednesday’s close wasn’t doing much of anything. Certainly nothing that had not been done already intraday, a lot.

Tuesday’s 1132.50 high was being tested at the close. It had been tested or overlapped 6-7 times already, through every timing window. Buyers gained no traction on the day. But neither did sellers, and they bear the burden of proof.

Wednesday’s 1135.50 high had printed several minutes before the session’s last hour. New session highs during the session’s last hour would have easily extended higher. Extending higher would have expended buying pressure. Sellers didn’t exploit the hesitation, so mild weakness at Thursday’s open – similar to Wednesday’s opening expectations – would likely recover to fresh highs.

Pattern points (And technical influences)
Clearly, new highs aren’t attracting new buyers. And they’re not attracting sellers. Thursday’s open is vulnerable to gapping up or surging. And as with Wednesday, mild weakness at Thursday’s open would likely recover to new highs.

Sellers can’t retake control at this stage without gapping under prior lows. A gap under Wednesday’s 1130.00 lows would at least attack Tuesday’s lows down to 1126.25. Any lower would essentially seal a top. The actual path lower would find obligatory support at 1117.00-1119.00, and then upon filling the gap back to 2009’s close.

Bottom line (My underlying premise)
Wednesday was the first session since Monday and Tuesday’s breakout and confirmation. I noted here in yesterday’s Trading Plan that the breakout seemed suspicious. Wednesday’s lack of follow-through may have discounted this sufficiently to allow follow-through Thursday. And if Thursday does resume the breakout, then it should be steep, if not also substantial, but not necessarily long-lasting.

I would consider selling only after an early surge appeared to be waning, or on a sufficient gap down. Extending the breakout through Thursday’s close would put into play the 1157.00-1158.00 area. Otherwise, turning down immediately would leave no unfinished business above.[/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.