Trading Plan for 1/9

If anxiousness ahead of AA’s earnings inhibited Tuesday’s buyers… then Wednesday’s buyers should inhibit sellers. Gapping up would do that. Gapping down only shallowly could get a late start at recovering, but it’s getting late already.

Pattern points… (Setups and technicals)[pay]
Continuing Monday’s decline into Tuesday doesn’t mean much itself. But continuing the two-day rally into Wednesday would mean the decline could no longer be limited. Preferably, normally, Tuesday would have ended in rally mode, if a bigger decline was not underway. But Tuesday did not recover into positive territory.

So, either the decline extend considerably lower through the week, or Wednesday’s open will gap up enough to compensate for not having found the strength Tuesday. Perhaps anxiousness ahead of Alcoa’s (AA) post-close earnings inhibited Tuesday afternoon’s recovery attempt. At least sellers didn’t gain traction, since the close recovered back above Monday’s prior low.

Whatever the delay’s cause, gapping up sufficiently Wednesday — above a prior high like 1456.00-1458.00 — could resume the rally to probe above Friday’s 1463.00 high. Otherwise, resuming the decline must also gap down Wednesday, at least under 1450.50. Any shallower opening weakness could still recover intraday.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The quarterly/annual earnings onslaught among high-profile companies has unofficially begun. The calendar actually gets busy next week. But look for more chatter about it, and an opportunity to gauge how the market intends to respond. [/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.