Trading Plan for 8/26

Any more Buffets out there?… Any more private pools of $5 billion? No? That’s too bad. There are plenty of BankAmericas (BAC). Even BAC is still a BAC. While its winning session may have bought some time, it created an Island that will have to be retested by a new downleg eventually. [pay]

Pattern points… (Setups and technicals)
Now the question is whether the S&Ps opening surge up to 1188.50 will be retested, too. The open’s extra optimistic rally was reversed well into negative territory at 1157.00 and 1153.00. Early. There was more than enough time to extend down, but Wednesday’s 1153.75 low held its test as support.

Perhaps a break lower was only delayed, with sellers paralyzed by anxiousness ahead of Bernanke’s Jackson Hole speech. After all, buyers didn’t exploit the hesitation with a rally.

Wednesday’s low happens to be the last low prior to Thursday’s high. Closing under it would have signaled the trend changing to down. Three separate timing windows Thursday were positioned to break under Wednesday’s low, but did not.

A much lower close Friday is needed to signal the trend reversing down. Otherwise, a shallow dip could still recover and retest Thursday’s 1182.25 opening print – perhaps also 1193.00.

What’s Next… (Outlook and opportunities)
Friday morning’s two big news events are post-open — econ report at 8:55, and release Bernanke’s Jackson Hole statement at 10:00. The opening print could be within Thursday afternoon’s 1154.00-1165.00 range. If so, trending attempted in one direction would likely retrace back into the range, and probably reverse through it more durably. [/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.