Trading Plan for 9/8

Sound familiar?… Wednesday’s rally left no unfinished business above, satisfying its target (1198.25). Tuesday’s rally had ended the day by testing its (1165.50) resistance. The similarity could even persist to the point of gapping up Thursday. Would that make the rally likelier to extend higher intraday, or likelier to reverse down? [pay]

Pattern points… (Setups and technicals)
There are a lot of relevant similarities between Tuesday and Wednesday’s patterns. Exiting the morning’s bias environment in rally mode, noon hour highs, fresh highs through the afternoon’s bias environment, and a last-hour pullback recovering to fresh highs.

This comparison is relevant because similar consecutive setups tend not to resolve similarly. Tuesday’s setup resolved by gapping up and extending higher. Gapping up Thursday would only increase the similarities, and would be even less likely to extend higher.

Gapping down under 1183.00 basis Dec (1189.00 basis Sep) would trigger a session-long decline. Otherwise, some sort of fresh high should print. We have been focused on 1197.00-1198.00 (1203.00-1204.00), but that could be fine-tuned to 1196.00 (1202.00). Turning negative from testing any resistance could quickly gain traction.

1201.50‘s recovery (1207.50) through a relevant window could put into play 1237.50 (1243.50). But beware too much optimism ahead of Bernanke’s afternoon speech, or the president’s evening speech.

What’s Next… (Outlook and opportunities)
The front-month rolls forward to Dec at Thursday’s cash session open. It is trading at essentially a 6-point discount to Sep, whose prices are quoted above parenthetically… Wednesday’s Market Wrap recording can be found here.[/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.