Trading Plan for 8/22

One day after bemoaning… August’s narrow intraday ranging, the market provides a very satisfying intraday slide, with plenty of warning signs. Here’s another: Just as August’s rally was masking its narrow intraday ranges, Tuesday’s slide may be masking the rally.

Pattern points… (Setups and technicals)[pay]
In other words, the burden of proof is still on sellers. Tuesday’s slide left outstanding the open’s gap up to 1419.00 to attract price higher. Extending the drop first would not be considered durable top so long as the gap remained unfilled.

Meanwhile, Tuesday’s sellers expended a lot of energy intraday without any refueling bounce. And buyers didn’t waste energy trying to bounce at the close, which settled just at or under the prior three sessions’ closes. A retest of 1419.00 could be done much sooner rather than later.

The drop is vulnerable to extending down for the same reason that retesting 1419.00 could form a durable top. It originated from a relevant level at the morning’s 1425.00 renewed bias-up target. Tuesday’s reaction down ON NO NEWS is very much in-line with the thin air that was expected up here. And the intraday reversal down was correlated to a downgrade in AAPL. A stock. One stock. Not a good sign.

[/pay]What’s Next… (Outlook and opportunities)[pay]
We began discussing the likelihood for the recent basing at 1393.50-1394.25 support to launch a very brief final thrust. The pattern had already entered a “shark stage” by mid-morning, and the shark had paused upon exiting the bias environment. Shark pausing, thin air, topping… Just beware of sudden downside moves. [/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.