Trading Plan for 1/8

If Monday afternoon’s recovery were any higher and faster… then it would have merited a hold-long through the close. The alternative isn’t necessarily bearish, not unless the rally doesn’t extend higher almost immediate.

Pattern points… (Setups and technicals)[pay]
Closing at a new trend extreme on Fridays tends not to be permanent. Monday’s gap down to 1455.00 failed to extend lower. The late-morning fresh low down to 1451.25 never extended either. Each held a fresh low that only threatened relevant support before reacting up.

Monday afternoon’s rally retraced them entirely, and probed above the morning’s 1456.25 high to 1457.75. Sideways action into the close did not recover high enough early enough to suggest holding-long through the close. But at least sellers gained no traction, and Monday afternoon’s rally is likely to extend higher.

Extending the rally Tuesday morning should waste no time before probing fresh highs up to 1464.25-1465.50.  The market would be vulnerable to reacting down from there, or else first continuing up to 1469.75 and/or 1474.25.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Having reacted down from a new trend extreme on Friday, the rally must resume Tuesday, or else risk not resuming this week. Back under 1451.00 would launch a deeper and lengthier pullback.[/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.