Trading Plan for 8/22

Deja vu, all over again… This week’s Expiration Indicator triggered at Wednesday’s close, after the morning’s probe into positive territory had failed. It signaled a downward bias into and out of the weekend. Friday morning’s probe into positive territory also failed. As if the setup wants to remind us it’s in charge… Don’t forget about tomorrow morning’s Strategy Session at 9;30am ET. [pay]

Pattern points… (Setups and technicals)
One sticking point to the sell-off’s durability is the overbought RSIs at Friday morning’s 1153.25 high. It wasn’t a reaction to news and it happened during a timing window. While it did indicate the pattern was vulnerable to reversing down, that reversal should be retraced.

If any day can be dismissed for odd behavior, it is expiration. It wouldn’t be the first time. But we’ll still keep in mind the potential attraction back up to 1153.25. For now, that reversal won the day, all 34 points of it, back down to 1119.00.

The cash session’s 1119.75 close was under Thursday’s lows. And Thursday’s lows already chipped away at support from the prior week’s lows (by retracing 61.8% of the consolidation). Friday was a breakout, needing to be confirmed by a second consecutive lower close Monday.

What’s Next… (Outlook and opportunities)
Speaking of Monday… While new lows are likely intraday, a new low close is not assured. Even if new lows intraday were to test the 1077.00 crash low (neutralizing its attraction), a recovery into the close would still be possible. Recovering 1134.25 through the open and 1143.50 through the morning would signal that expiration’s downward bias had ended already. [/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.