Trading Plan for 8/18
[pay]About that close (How the prior session ended)
The next higher target above 1087.50 was 1094.00-1095.00. Despite being exceeded in time for the 1:20 timing window, it was retested after a 1:30 peak at 1098.50. The balance of the afternoon slid lower. The cash session close barely bounced off of 1098.00. Futures fell to nearly 1088.50, but the cash session closed 2 points higher.
Pattern points (And technical influences)
Tuesday’s afternoon slide began well before the close. The prior target at 1087.50 was attacked within 1 point. It rejected a probe above the morning’s high, and not by a little. The intraday range was retraced by 61.8%, and the range back to Monday’s close was retraced by 38.2%. Also retraced was all intraday price action after the session’s first 90 minutes.
In other words. Tuesday’s probe above 1094.00-1095.00 was rejected decisively. That’s important. Recovering it would have put into play 1101.50, awfully close to invalidating last Wednesday’s trend change.
Like Monday’s session, buyers did not gain traction. Session highs were rejected back under the morning’s highs and also under the noon hour’s lows. Buyers might gain traction by gapping up Wednesday, like Tuesday’s open. But any lesser opening strength would be vulnerable to failure.
A mildly weaker overnight drop would also be vulnerable to failure. But the recent gaps down and weak intraday bounces is a pattern crying out to be probed, forcefully. This is regardless of the 1070.25 low’s oversold RSIs that require a retest.
Bottom line (My underlying premise)
The premise is that Tuesday’s rally (and Monday’s post-open rally, for that matter) are part of a corrective bounce. Gapping up, extending higher, and failing to hold most of a probe higher reflects thin buyers. Absent a gap up, Wednesday’s close should prove this out by retracing perhaps the rest of Tuesday’s gains..
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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.