Trading Plan for 8/22

If the rally is sponsored by strong hands… then it should employ any tactic to preserve its momentum. Closing Fridays at a new trend extreme is the most obvious when greeting the session in such close proximity. So, NOT closing higher Friday…

Pattern points… (Setups and technicals)[pay]
It’s a fine line between weak hands and less strong hands. Both are overpowered by stronger hands. But while overpowering weak hands can produce an extended trend, overpowering strong hands can be short-lived. And the volatility can be substantial, as each side reasserts itself.

That seems to have been the case Thursday. The morning’s 1987.00 bias-up signal was probed overnight. It was probed during the opening half-hour. There was no probe at 10:15, signaling that sellers had absorbed buyers. But buyers still weren’t pinned, and they tried again at 10:30. Even that late effort only overlapped 1987.00 instead of recovering it.

At 11:30 when the bias environment began lapsing, 1987.00 had been probed even higher. And it maintained its recovery. Strong hands were overcome by stronger hands. But ultimately, despite probing both lower and higher intraday, the close was still overlapping the open’s high.

There is wide divergence of opinion in this area. Thursday afternoon’s 1993.25 bias-up target was left outstanding above. The morning’s no-bias trending hasn’t yet been retraced entirely back down to its 1987.00 bias-up signal, making its 1984.75 10:15 print likely to be tested, too. Either attraction can be neutralized overnight.

[/pay]What’s Next… (Outlook and opportunities)[pay]
New trend extreme closes on Fridays are rarely the trend’s ultimate extreme. So, not closing at a new trend extreme this Friday — especially coming off of Thursday’s trend extreme — would suggest this rally is peaking. A bigger concern would be probing fresh highs early, and then quickly reversing down, which is a difficult pattern to recover ahead of the weekend.[/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.