Trading Plan for 8/21

If this is where the last downleg began… then can this week’s retest of prior highs extend much higher in the near-term? A lot of buying pressure has been expended in a brief time — gapping up, and extending higher relentlessly intraday. The momentum can carry through prior highs, but can it prevent at least another corrective dip?

Pattern points… (Setups and technicals)[pay]
Wednesday afternoon’s rally produced a new high print, piercing July’s prior high by a single tick. An errant tick, up to 1986.00. It was certainly a new high for the two-week old rally. Corrective, or not, a probe of fresh highs is all but assured.

Fresh highs became likelier upon recovering 1951.00 and then 1968.00, and inescapable above 1973.00. Now, higher highs are all but assured due to Wednesday afternoon’s “unfinished business above” at its 1987.00 bias-up target. The path there is not at all assured, nor is the purpose of new highs — whether to briefly retest, or to extend in a new rally leg.

Briefly retest of extend, either way, new highs should test 1993.00. And briefly retest, or extend, a dip back into Wednesday’s range would be likely, since trending inspired by FOMC news is always retraced entirely. Peaking or already reacting down Thursday would help to prevent a new high close on Friday. A new high close on Friday would be bullish, but closing back under 1973.00 and 1968.00 would seal a top.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Thursday morning’s econ reports are a virtual minefield of volatility catalysts. Jobless Claims will relate to Wednesday’s FOMC news for any glimpse it offers into employment, which the Minutes suggested as gaining importance. LEI’s inflation perspective speaks to another thread discussed in the 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.