Trading Plan for 8/1
If Thursday’s drop were to extend Friday… then it could be awhile before new highs are targeted again.
Pattern points… (Setups and technicals)[pay]
We’ve been talking about 1931.75 for awhile, more like mentioning it in passing. It would be the objective of a downleg that might begin prior to retest last Thursday’s highs. It was triggered by not holding 1960.25 through a relevant timing window Wednesday morning. Thursday would have been the next opportunity to confirm it was in-play — but it was already tested.
And its test included the room for noise around it down to 1926.75. That’s eerily similar to testing both the rally’s 1982.00 target and its room for noise up to 1984.75.
But 1982.00‘s test was expected to be part of a top, albeit leaving outstanding the potential for a retest. Meanwhile, 1931.75 isn’t necessarily part of a bottom. Failing to hold its test has put into play 1911.00 and 1903.00. Thursday’s drop already tested 1923.50.
Whatever happens overnight, Friday morning’s Employment Situation report should be more influential. Triggering a gap up above 1931.75 would help to reject the close below it. Gapping up above Thursday afternoon’s 1939.00 high could form a “session-long rally.”
At the very least, bottoming requires a positive close Friday. Thursday’s close was under the two-week old 1953.25 prior low close, signaling a trend change. A second consecutive lower close would confirm at least a third lower close to come. Officially, the trend change is confirmed simply by not immediately recovering the prior low.[/pay]What’s Next… (Outlook and opportunities)[pay]
The two-week old prior low was produced by a bearish WedEX accelerating Friday’s selling pressure into Thursday. That excessive pessimism created a rally Friday. Perhaps that instance recovered because of unfinished business above back to July 3’s high. Could Thursday’s sellers have accelerated selling pressure ahead of the Employment Situation report? [/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.