Trading Plan for 8/17
[pay]About that close (How the prior session ended)
Monday afternoon’s fresh lows at 1072.75 made the drop’s most recent bounce limit productive at 1074.75. Both 1-minute and 3-minute RSIs diverged positively at the low, and the prior hour’s low was recovered through 3:10-3:20. None of which was a buy signal. But the productive 1074.75 bounce limit was recovered by more than 2-3 ticks, eking out a flat close on the day.
Pattern points (And technical influences)
The afternoon’s no-bias environment had ended by probing fresh lows, back under the morning’s 1074.75 bias-down signal. Its recovery through the morning’s bias timing window had created the objective to at least touch 1081.25. It was missed by only 2 ticks, so the well-timed rejection back under 1074.75 does indicate that buyers did not gain traction.
The burden of proof was on buyers to gain traction since sellers were still in control. The reactions up from each lower low had not recovered any prior high through their closes. Buyers might seem productive for having prevented the open’s gap down from extending. But their efforts recovered no prior high. All of that buying pressure was wasted.
Oversold RSIs at Monday’s opening low require its retest. Breaking under 1074.00 would indicate the retest underway. Gapping up Tuesday above 1082.00 would help to marginalize sellers through at least the morning. Any less opening strength would be likely to reverse down sooner.
Bottom line (My underlying premise)
Bonds stole all the oxygen from the room Monday. It gapped up to new recovery highs and extended higher. If stocks start falling hard, bonds may have priced themselves out of being a destination for a flight-to-safety. It will be difficult to absorb the next sell-off attempt. Failing to hold any key support or lower objective through a relevant timing window could mark the beginning of a much deeper intraday drop. [/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.