Trading Plan for 9/1

The rally’s next objective was met… and its reaction was lengthy. The question is whether selling past Wednesday’s first hour robbed buyers of their momentum, or simply refueled them.[pay]

Pattern points… (Setups and technicals)
Wednesday’s close barely avoided closing negative, but it ended under Tuesday’s high. Rejecting both would have been bearish, especially after the morning’s test of the rally’s next objective at 1226.00-1228.00. Regardless, the price action is not bullish.

At least much of Tuesday’s last-minute plunge could be dismissed for being post-close. Not Wednesday. Its post-open drop defined much of the session.

Closing under Monday’s 1208.00 high would have sealed a top — instead, 1208.00 held as support at Wednesday’s last hour low. Tuesday’s 1210.50 cash session close held two tests as support, too. And Tuesday’s 1218.75 high was being attacked at Wednesday’s close.

The session did form “ineffectual optimism.” Gapping up, probing prior highs and spending the entire session in positive territory are as optimistic as it can get. Excpet for not closing above the prior high. That’s ineffectual. Ineffectual optimism is distribution, context, but not necessarily timing. Fresh highs can be probed, but the resolution is still down.

What’s Next… (Outlook and opportunities)
Wednesday’s 3:10-3:20 window trended down, to fresh afternoon lows. this should be followed by at least one more lower low. Bouncing in the interim into Wednesday’s close suggests more than one more lower. Meanwhile, the 3-Day Weekend signal is undecided. Closing decisively above 1218.75 would have been bullish, and under 1208.00 bearish. Breaking either decisively through Thursday’s open could still qualify… Click here to watch the post-close Market Wrap recording.[/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.