Trading Plan for 8/11
[pay]Pattern notes.
The 1005’00 area remained relevant. Moves away from it were retraced, both Sunday night and intraday Monday. A bounce from session lows testing 998’25 was at 1005’00 when the cash session closed. The bounce extended back up to the morning’s 1007’75 high before the futures close.
Friday’s “breakout” close above prior highs was already suspicious. Its confirmation by closing at higher highs Monday would have been suspicious. A higher close now wouldn’t be considered an extension of Friday’s gains, and it would require its own confirmation.
Monday’s session was “ineffectual pessimism.” Its price range developed exclusively in negative territory under Friday’s cash session close. This is often followed by an early rally effort, normally testing the prior day’s high. Back above 1009’00 would suggest that move was underway, still having resistance at 1011’00 and at 1013’00. A retest of prior highs is not the same as a breakout.
Monday afternoon’s low around 999’00 printed before the last hour, and Monday’s last trending was up. Maintaining a gap down Tuesday under 999’00 would signal a session-long deline. Tuesday’s session isn’t required to trend in either direction as Monday’s was not, but Monday’s ranging should have cleared the way.
Indicators and Internals.
1-minute RSI diverged positively three times through Monday afternoon’s decline. The last finally recovered above a prior high to avoid signaling a much steeper decline underway. The recovery was triggered by a positive divergence whose setup was fulfilled. The 3-minute RSI became oversold at Monday’s last-minute high, but the 1-minute RSI was already deteriorating out of being overbought. There is no requirement to trade any higher.
Tuesday’s opportunities.
Monday’s price action was essentially un-influenced, the product of a news-free environment. In the middle of two expirations, no econ reports or earnings announcement. And the session ended flat to lower. Tuesday brings a steady flow of econ reports and events through the morning and into the 1:00pm auction, one day prior to FOMC news. None of it is likely to trigger durable trending, so unless sellers start pushing back harder Monday night, a temporary attack or test of Friday’s highs is likely – and a reaction down from there. [/pay]