Trading Plan for 8/20

If Sandra Bullock is 1968.00… then George Clooney is 1973.00. That makes the market “Gravity.” Like Clooney, Tuesday’s open suddenly snapped free, and spent the rest of the movie — I mean, session — drifting gently and endlessly into space.

Pattern points… (Setups and technicals)[pay]
More descriptively, Sandra represents Monday’s inertia around 1968.00. Sorry, Sandra. Gapping up Tuesday shallower than 1973.00 wouldn’t have had enough force to come untethered from 1968.00. But gapping up through 1973.00 was enough force — just enough force — for the Clooney gap to break free from Sandra.

Clooney drifted from there. Not because of a jet pack or other propellant. There was no opposing force, resistance or gravitational pull. Similarly, 1973.00‘s gap extended without expending much effort — no intraday dip needed to be absorbed and recovered, and the session’s mid-section just channeled higher.

So, it’s a little difficult giving the rally’s momentum a benefit of the doubt. And it’s a little difficult assuming the close above 1973.00 has put into play new highs. After all, Tuesday didn’t so much climb higher as drift. But new highs are nevertheless in-play. Too much of the recent drop has been retraced not to be rewarded with new highs. Clooney traveled further.

[/pay]What’s Next… (Outlook and opportunities)[pay]
But now I’m questioning whether new highs will be durable. Probe new highs, yes. Trend much higher, maybe not. Regardless, those questions are much loftier than current prices. More timely is the question whether this drifting rally can defend against a negative reaction to Wednesday’s FOMC Minutes.[/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.