Trading Plan for 9/2
[pay]About that close (How the prior session ended)
Hours of ranging sideways didn’t end when the afternoon’s no-bias environment lapsed. Trending wasn’t required, but it was finally attempted past the bottom of the hour. The late surge briefly probed session highs, then reversed back down. And like Tuesday’s close, firming into the cash session close then surged to fresh highs minutes later.
Pattern points (And technical influences)
Wednesday’s late surge ended an hours-long narrow trading range. Had it extended through the close, Thursday morning would extended the range, too. That would have been surprising ahead of Jobless Claims and a busy econ calendar otherwise.
The late surge also opened the door to a reversal signal. Gapping down under a narrow range would have undermined its severity. But gapping down under Wednesday afternoon’s 1075.00 low would not be consequential, and would trigger a session-long decline.
Potential for reversing down also comes from the intraday Running Correction. The setup reflects excessive optimism, so its breakout attempt is sponsored by weak hands. That characterization would have been served just by surging from a standstill, instead of trapping shorts first. Wednesday’s late breakout went further by starting later, well past any window controlled by strong hands.
Sellers really needed to be in obvious control near Wednesday’s open to be able to regain traction before the weekend. There is plenty of room for a steep dip. But the premise is that a dip is likely to be recovered. Breaking under 1066.75 through a relevant timing window would give sellers one more chance.
Bottom line (My underlying premise)
The breakout may extend higher. Wednesday’s ADP Employment report surprised negatively. But its reaction was limited and brief. Perhaps this market wants to absorb bad news. A rally’s bigger risk Thursday may be failing to maintain early gains, since Wednesday’s breakout came so late. [/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.