Trading Plan for 8/11

Cue up the Jaws theme music… “Just when you thought it was safe to go back in the water.” Tuesday night’s retracement had corrected just enough optimism that another rally leg could form. Then the bottom dropped out, almost literally. Perhaps that is saved for Thursday. [pay] Here’s the link to Wednesday’s post-close Market Wrap.

Pattern points… (Setups and technicals)
Wednesday morning’s ~1122.00 prior lows weren’t probed until the session’s last 10 minutes. The afternoon’s slide then quickly bottomed at 1113.75, but its bounce did not recover the prior low. Sellers gained traction for their effort.

So, the late drop’s sponsorship must be strong hands, since it extended down under 1143.50‘s last unfinished business, and closed under prior lows. Simultaneously oversold 1-minute and 3-minute RSIs at the 1113.75 low also reflect strong-handed sellers.

Bouncing from oversold RSIs would likely fail. Wednesday’s inside day makes trending difficult if not trending hard early. For example, gapping up Thursday above 1143.50 would be likely to extending higher into the afternoon. Any shallower opening bounce, or initial weakness, should resolve in fresh lows under 1113.75 before the 10:15 bias timing window.

What’s Next… (Outlook and opportunities)
One other potential buy signal should be monitored – it is a fresh low under 1096.00 that has already reversed overnight for a gap up. Otherwise, without any rally effort, Monday night’s 1077.00 low and lower could be met Thursday.[/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.