Trading Plan for 9/2

If at first, you don’t fail enough… The rally’s 1226.00-1228.00 objective was retested Thursday, giving its reaction down another opportunity to gain traction. How did it do?[pay]

Pattern points… (Setups and technicals)
1226.00-1228.00‘s retest peaked under Wednesday’s 1229.75 high. But it was all the same pattern since the interim low never gained traction. Thursday’s reaction down did what Wednesday’s did not – closing back under two prior sessions’ highs, closing under a prior session’s low, closing in negative territory.

Is that enough to push momentum off the ledge?

My 3-Day Weekend indicator is intended to identify when strong-handed sponsorship has positioned for either a near-term breakout or a reversal. This week’s setup stopped short of clearly signaling at Wednesday’s close, and Thursday’s open didn’t compensate for a delay. So, Thursday’s bearish close was too late to trigger the setup.

But Thursday’s close was bearish. We just don’t have the luxury of the 3-Day Weekend indicator to offer its timing context. Gapping up above 1210.50 at Friday’s open would reject Thursday’s late-afternoon congestion — definitely possible in reaction to the Employment Situation report. That would likely delay another downleg, but its resolution is still likely down.

What’s Next… (Outlook and opportunities)
Another attack on 1226.00-1228.00 is not required, let alone another test, but another attack would be likely to probe fresh highs above 1230.00 anyway. Continued weakness could range back down to 1193.00 without actually launching a downleg. Any lower could slip sharply into the weekend… Click here for the recording of Thursday’s Market Wrap. [/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.