Trading Plan for 8/14

If buyers aren’t rewarded for recovering from Tuesday’s deep dip… then there must be some substantial downdraft on its way. Last Thursday’s complete retracement never gained traction, so its shortcoming can be dismissed. But Wednesday really has no excuse.

Pattern points… (Setups and technicals)[pay]
Another big dip, another complete recovery, and another sideways ranging afternoon. So, what else is new.

Well, for one thing, Tuesday’s big retracement back to the big drop’s origin was a recovery above the morning’s highs. That’s because the drop’s 1694.00 origin was pre-open. Retracing it from 1679.25 recovered above the 1690.50 post-open high. And held.

Buyers gained traction for their efforts.

That hasn’t yet happened on any session since last week’s highs. The immediate result has been either to extend down the following day, or to reverse down from an overnight rally. This setup is the best opportunity to rally through the day.

[/pay]What’s Next… (Outlook and opportunities)[pay]
And since buyers gained traction, rallying does not require gapping up. Declining does require gapping down — although gapping down can be absorbed, and does not necessarily require developing into a decline. So, I would prefer buying strength, or a qualified recovery from negative territory.[/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.