Trading Plan for 9/10

[pay]Pattern notes.
Buyers failed to gain traction Tuesday because the decline’s Sep 1 last relative high was tested but not recovered (thick red highlight on the nearby chart, basis Sep).  Not recovered at all. Not at the open’s gap up, not intraday, and not at the close. The entire session was spent attacking the area, without probing it.

Another overnight rally into Wednesday’s open barely threatened the decline’s Sep 1 last relative high. But it was recovered after an opening dip. It was recovered to serve as support through much of the morning. And then again at the afternoon’s lows. The session’s last hour did rally back towards the noon hour consolidation. But this recovery was limited to the last hour, and it recovered no ground that hadn’t been covered previously.

In fact, the last-hour bounce held a test of the mid-day consolidation’s “higher prior low” (solid red line). For the rally to continue here, Thursday’s open must essentially gap up above the mid-day consolidation’s prior highs (solid green line). New highs would be targeted, but I would hesitate to consider buyers gaining traction for extending the rally leg. Rather, probes above August’s highs at this stage of the pattern would just be more noise around the range.

Wednesday’s late price action did trend, and it essentially trended up. The afternoon’s low (thick red highlight) printed before the last half-hour, so gapping under it would trigger a session-long decline. The setup is designed to identify trapped buyers (or sellers), but this would also happen to reject Wednesday’s close above the decline’s Sep 1 last relative high.

Indicators and Internals.
No new business was left outstanding by Wednesday’s technical action, and all technical setups were fulfilled intraday.

Thursday’s opportunities.
This pattern isn’t one to range narrowly from Wednesday’s close, and the day’s relatively high-profile news items are entirely capable of shaking things loose. The healthcare debate continues, but econ reports are more influential to price action. Thursday’s calendar is interesting, from Jobless Claims pre-open, to the 30-year bond auction at 1:00. A gap open beyond either of the afternoon’s extremes would be likely to extend in that direction… The S&P / ES front-month contract rolls to Dec (Z) at Thursday’s cash session open. The Sep (U) contract is front-month overnight.[/pay]