Trading Plan for 8/14
[pay]Pattern notes.
A funny thing happened before Thursday’s open, on the way to retesting last Friday’s 1016’00 high. The overnight 13-point rally from Wednesday’s 1002’25 close was optimistic in the wake of positive comments about a global recovery. The it was blind-sided by econ reports showing quite the contrary. The reaction fell through the rally’s origin back to 998’00.
A funny thing happened on the way to reversing optimism into pessimism. The drop’s momentum was clearly at its extreme, but its reaction bounced back to the morning’s 1010’25 bias-up target. Through some very satisfying wide intraday fluctuations, S&Ps ultimately held 1010’25 through every relevant timing window. Any higher through any relevant timing window would have started being bullish. But late narrow ranging around 1010’25 broke higher on a very last-minute 3-point surge that originated too late, after too long, to be considered valid.
In fact, the late surge peaked at 1014’00, a 61’8% retracement into the consolidation at Thursday’s pre-open highs. Tuesday’s late dip to 991’00 served a similar function in retesting that day’s low, and lower lows didn’t come easily or for very long. Thursday’s late surge also essentially fulfilled the 1014’25 target of a last-hour buy signal. Two similar setups this week also left the next day’s open without trending underway or a pattern forming. Their opening gaps were large and their intraday reversals larger.
There’s room overnight for a break above 1015’00 to added 2-1/2 points. And even higher highs intraday Friday could threaten to probe new highs for the week by 7-8 points. Otherwise, a bigger drop overnight could reinstate Thursday morning’s reality check, awakened and exacerbated by the weekend’s fast-approaching illiquidity.
Indicators and Internals.
RSIs were simultaneously oversold at Thursday morning’s 998’00 low. Also, 3-minute RSI was at its lowest oversold while the lowest 3-minute price bar formed. Bottom-fishers step in front of such aggressive selling, but they’re time horizon is short-term. Durable rallies don’t tend to follow, so 998’00 should be retested. Meanwhile, a very minor negative divergence after Thursday’s close has inhibited price from rising further. If it doesn’t reverse down from testing 1015’00, then the next higher target at 1017’50 would be dangerous.
Friday’s opportunities.
Since Thursday’s optimism was blind-sided by econ reports, Thursday afternoon’s optimists should be concerned. They might want to retrace overnight where Friday morning’s calendar can be better absorbed. Instead of three reports coming simultaneously, three releases are staggered from pre-open to post-open. Of course, the reaction(s) might be irrecoverable if the reports confirm Thursday’s surprises.
SPECIAL PROGRAMMING NOTE: My availability next Wednesday August 19 will be very spotty. I am still arranging the logistics, but even the best case scenario will have me away from screens for at least a couple of chunks of time. I will update this as more information becomes available. [/pay]