Trading Plan for 8/8

If Wednesday afternoon’s rally had extended any higher any earlier… then it could have recovered all of the drop from Tuesday’s close, instead of just the drop from Wednesday’s open. That’s a lot of buying pressure to expend without gaining traction for the effort. That buying pressure will be sorely missed if the following open doesn’t immediately compensate for the delay.

Pattern points… (Setups and technicals)[pay]
Wednesday was the second consecutive afternoon whose template suggested the bias environment would resolve aggressively. So, it was also the second consecutive afternoon not to resolve aggressively. Each remained range bound through the close.

Their setups differed, but two similar consecutive resolutions (a non-resolution is still a resolution) reflects a great deal of stored energy. There is a great likelihood for gapping open Thursday either sharply higher or sharply lower.

Gapping down is slightly likelier, since a sell signal was triggered under 1687.50. It was triggered upon exiting the position-squaring window, which is not optimal, but it does get a benefit of the doubt.

Gapping up is likely otherwise. The afternoon’s 1689.50 high was also the morning’s high, so its obligatory resistance may have been responsible for inhibiting Wednesday afternoon’s rally. There is no unfinished business below, and two attractions above — one of which is a new high.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Wednesday’s close narrowly avoided qualifying for a hold-short. That doesn’t prevent trending down overnight, but it should caution against buying weakness.[/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.