Trading Plan for 9/17

[pay]About that close (How the prior session ended)
The long-awaited fresh session highs finally printed when the afternoon’s bias environment started lapsing after 2:30. A recovery above 1117.00 had signaled the likelihood for filling the gap back to Wednesday’s 1120.50 cash session close. Its test consolidated through the last half-hour. A last-minute setup rallied 5 points to test 1124.50 at the futures close.

Pattern points (And technical influences)
Thursday’s session was working on “ineffectual pessimism.” The open had gapped down, and the entire session was ranging in negative territory. Continued through the close, this setup would have carried pent-up buying pressure overnight.

But the afternoon’s rally squandered that good will without even probing positive territory. And a 4-5 point surge through 1120.00 followed the cash session close, taking sentiment full-circle to being optimistic.

Basically, Wednesday night’s template applies to Thursday night, too: probe fresh highs overnight up to 1124.50, dip to the 1118.00 area, retest the overnight high at the next open. So far, so good: Thursday’s post-close surge tested 1124.50, and the Globex open dipped to 1122.25.

There’s a twist to the template. Retesting the overnight high would have been likely to hold, and then trigger a sizable downleg. It still could, but only if its retest were rejected early. Being a Friday and being expiration, opening strength to new highs could gain traction to become a runaway rally.

Bottom line (My underlying premise)
I noted here Thursday morning that this market was embracing volatility. The morning’s choppiness and the afternoon surge proved it. Friday’s expiration probably will, too. The morning’s two econ reports will keep things lively. And although volatility might end early (many traders leave early for evening worship of the Yom Kippur holiday) that could drive up the interim volatility, which would be very unusual for a Friday.[/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.