Trading Plan for 1/9
[pay]Pattern notes.
Trend watch update: Wednesday’s aggressive selling off of new highs gave potential to a limited drop, only a correction of the recent rally. Then came Thursday. The gap down threatened to repeat Wednesday’s session-long decline which would have been excessive pessimism. The session-long ranging nearly rendered itself as “ineffectual pessimism.” But Thursday’s session was just right, and the Bears are are headed home from their picnic in the woods.
Wednesday’s decline was unlikely to extend immediately with the Employment Situation report just around the corner. The session wasn’t even likely to trend, only to range. Slightly higher highs back to 908’00-909’00 were likely, which was finally met overnight upon probing the range’s upper-end.
Thursday’s tempered selling neutralized Wednesday’s aggressive selling. Thursday’s highs neutralized the magnetic attraction back to the gap at Wednesday’s close. Prices are initially firmer overnight, reflecting last-minute optimism, making it more difficult for Friday’s news to satisfy the anticipation, let alone provide an upside surprise.
Trending remains unlikely until nearer to the news. Price action prior to that might offer more clues to the immediate reaction – and more importantly, to the reaction’s reaction. A break maintained under 895’00-896’00 would trigger a session-long decline, which could be exacerbated for being Friday. Above 908’00-909’00 could immunize the session from selling pressure through late-afternoon.
Indicators and Internals.
MACD & RSI left no unfinished business Thursday. Not much was created anyway, since buyers and sellers both relinquished power to the range. That situation tends not to repeat the following day.
Friday’s opportunities.
The Employment report is due at 8:30. There’s little room or time for an initially favorable reaction if the session intends to decline intraday. Wednesday’s break is still relatively young, and there’s a weekend of illiquidity just hours away, so limp selling probably won’t gain traction. A rally can’t be discounted, whether or not session-long, but we’ll let reaction’s price action dictate that.[/pay]