Trading Plan for 8/27

[pay]Pattern notes.
Will S&Ps want to rest after Tuesday’s intraday round-trip in a 26-point intraday range? That doesn’t count the last hour’s 8 point rally into the close. Monday’s 8-point gap down was just the warm-up to a 16-point follow-through into noon, and an additional 5 points lost before the close. Last week’s last two sessions were volatile, too.

A rest would seem to serve buyers, giving bottom-fishers a second chance to buy 1260’00-1270’00. But no bullish pattern required a return to last week’s lows, so this week’s buyers aren’t relevant. Resting here would serve sellers, allowing them to refuel as weak buyers expend their energy.

Buyers could threaten to gain traction for filling the gap back to Friday’s close 20 points higher, an attraction that is probably keeping alive bullish hopes. I might even join that crowd much the same as last week when sellers slow-played their Aces too long. But the next downleg could be just one frustratingly narrow morning away from starting if Wednesday’s open hasn’t budged much from Tuesday’s close.

Indicators and Internals.
Lopsided internals might have required Wednesday’s session to reward Tuesday’s sellers for their relative productivity if total volume were any higher. But MACD & RSI did diverge negatively into the last-minute highs of the last-hour rally.

Wednesday’s opening setup.
If Wednesday’s session intends to trend – or even attempt to trend, as in probing either end of Tuesday’s range – then the open must almost gap beyond either end of Tuesday’s range. Either above 1274’75 or under 1267’25, and extend at least another 3 points before resting. Opening any shallower would more likely hold a test of either level, possibly into the afternoon. Pre-open econ reports are essentially limited to Durable Goods at 8:30.[/pay]