Morning Outlook for Day Traders -8/16/2021

We will be opening with a true gap down this morning and Gap Rules will apply. The gap down is occurring in the context of Afghanistan (the new Saigon), the China Virus Delta Variant, Fed taper rhetoric, a rising wedge reversal pattern and the 40-day cycle trough due later this week. 

The Fed Minutes will be published Wednesday, and monthly options expiration is due on Friday. Lately, options expiration has been brutal, resulting in trips to the 50-day line.

My line in the sand today would be the Globex low at 4441, then Thursday’s RTH low at 4430.25. Friday’s low is weak and won’t be much of a barrier to lower prices, so keep that in mind. 

Taking out the Globex high at 4459 would shift my bias to bullish. It coincides with a prominent POC.  Conquering Friday’s RTH high at 4463.25 would open up our remaining upside targets of 4480, 4500, and then 4537. Friday’s high (also the all-time-high) is poor, so it is vulnerable to penetration once tested.

Overnight inventory is net short, so the imbalance could lead to a brief rally on the gap, but don’t let that fool you into buying the first dip. Instead, follow the Gap Rules.

The bottom line is that If the overnight low holds, that will be a sign of strength and vice versa.

A.F. Thornton