Trading Plan for 9/11

If Tuesday’s gap up were any shallower… then it might have spent the balance of the session trending back down. Those extra 2-1/2 points above the bias-up target created extra room to absorb selling pressure, preventing it from gaining traction.

Pattern points… (Setups and technicals)[pay]
Tuesday’s session was very disappointing. Despite gapping up and renewing the bias-up signal, the 1683.50 renewed bias-up target was only met to within 2 ticks before reversing down. And the reversal down only touched the 1676.75 post-open low before recovering — first probing a fresh low would have been more appropriate.

I still expect Tuesday’s 1676.75 post-open low to be probed, more so since its retest left oversold RSIs. The afternoon’s recovery did not extend above the morning’s high, so the low’s retest was not productive. And where simply probing a fresh low would have sufficed, now a deeper trending attempt would be appropriate.

Although Tuesday’s wide ranging did not have any near-term predictive value, its second consecutive higher close did confirm Monday’s daily trend change signal. Unless Tuesday’s rally were rejected Wednesday — not simply by dipping, but by dipping under relevant levels through relevant timing windows — a third higher close is now required.

[/pay]What’s Next… (Outlook and opportunities)[pay]
An interim dip is possible before producing a third higher close. Gapping down under Tuesday afternoon’s 1679.25 low could trigger a session-long decline setup. Any sell-off would target at least 1675.50. Deeper would be likelier, but still also likely to recover and produce the trend change’s third higher close. Extending higher without any pullback would be likely to gap up above 1689.00 or 1693.00.[/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.