Trading Plan for 9/12

If Wednesday morning’s trapped shorts was already bullish… then you can imagine the added upside potential from adding Thursday’s trapped shorts into the mix. But the session’s late surge touched and held an outstanding target, so extending higher Friday probably needs to gap up. And if Friday is likely to extend higher, then it is likely to gap up. Which is why a hold-long was noted at Thursday’s close.

Pattern points… (Setups and technicals)[pay]
Thursday morning’s round trip was a great example of the significance of bias timing windows. The setup was Wednesday night’s dip being rejected through Thursday’s open at 9:45 and through the bias timing window at 10:15. The 1982.00 bias-down signal was recovered in time to avoid triggering it, despite having probed considerably under it.

The significance is two-fold. First, that clear signal didn’t prevent the opening bounce’s complete retracement from 1985.75 back down to the 1977.25 pre-open low. This one developed in time to invalidate the bias signal. But even a later drop could have been proved valid, the product of strong-handed sponsorship.

The retracement is significant for itself being recovered. Stronger hands can retake control from the strong hands that trigger the bias signal. But that’s a rarity. Two reasons to give the counter-bias efforts respect: even weak-handed sponsorship can be productive before failing, and strong-handed sponsorship overcoming the bias signal must be motivated by something truly extraordinary.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Thursday’s late high fulfilled the 1989.75 (basis Dec, 1997.50 basis Sep) unfinished business above left outstanding from Wednesday afternoon’s bias-up target. That was Thursday’s last-minute high. Afternoon buyers gained no traction for their earlier efforts, so extending higher immediately Friday requires gapping up. Extending higher after fulfilling a target is even more difficult. But a gap up would get every benefit of the doubt for extending higher intraday. Only gapping down back under Thursday afternoon’s 1981.25 low would be credible for reversing the trend down. [/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.