Plan for Wednesday, Aug. 22, 2007

Summary

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ES Resistance at 1456-1460
ES support @1433-1436

Yesterday's IDNR4 day resulted in an NR5 day today.



SPY is carving out an interesting looking ascending triangle pattern. Under normal conditions, and in an uptrend, this is considered bullish. But SPY is not in an uptrend, and the past week cannot be considered normal market conditions.
The decrease in volatility in SPY, and consequently, ES, indicates that it is setting up for a big move, as range expansion tends to follow range contraction.

However, I have no clue in which direction the breakout will occur. I still have some doubts about a break to the upside, but will plan for it regardless.
If there is a breakout to the upside, it has to prove itself, so I will let the initial breakout go by and try to enter on a pullback that retraces 38.2% or less. Basically, my plan is to catch leg2 of the move.

If there is a breakout to the downside, it will break below today's low (during RTH) at 1443. But the plan will be the same - catch leg2 of the move.

Either way, monitoring the opening range and any opening gaps will help to determine whether a breakout will occur or not, and the direction of the breakout.

In the meantime, I will continue to look for 2pt scalps tomorrow according to my setups, and be alert to any urge to make impulse trades.