Trading Plan for 8/12

[pay]Pattern notes.
Monday afternoon’s slide stopped short of retracing all of the morning’s No-bias rally back to its ESu 1296’00 origin, the S&Ps print at 10:15. Instead the drop bottomed 2 ticks under Monday morning’s 1298’00 bias-up signal. A 9-point bounce into the close peaked upon retesting the morning’s 1306’00 bias-up target.

That price action has been largely repeated overnight, falling back to yesterday afternoon’s 1297’50 low and then surging nearly 7 points to probe 1304’00.

Two attempted tests of 1296’00 do not a test of 1296’00 make. To the contrary, the first attempt’s short-stop might have been considered one leg of the overall downleg whose destination would include 1296’00. But the overnight low’s second short-stop qualifies as optimism, making 1296’00 unlikely to define the downleg’s low.

Indicators and Internals.
Twice as much NYSE up volume as down volume produced fewer than two times more advancing issues than decliners. Not terribly much, but Monday’s sellers were more productive than buyers, which tends to be rewarded the following day. RSI was oversold at Monday’s lows and again overnight. Each time was less oversold than on a prior higher low and could be described as a retest, so I’m not comfortable relying on either as requiring another retest. They’re likely to be retested, but not required.

Tuesday’s opening setup.
A couple of retail reports highlight this morning’s econ calendar. There might be room for pre-open or opening sequence reactions to probe yesterday’s last-minute high around 1307’00. But there’s no time to probe for any longer in order to retrace the rest of yesterday’s No-bias rally. That retracement is now targeting 1293’50, and should be part of an overall move to 1287’00-1288’00. Back above 1307’00 first would keep control from sellers, but not necessarily produce a new upleg.[/pay]