Trading Plan for 8/27

[pay]About that close (How the prior session ended)
Thursday’s drop into its last hour fell to 1043.00. The lowest oversold 3-minute RSI accompanied it, dooming any bounce to failure. Its 8-point bounce to 1051.00 was retraced to within 1 tick into the cash session close. It was probed by 2 more points after the Globex open.

Pattern points (And technical influences)
The 3:10-3:20 window trended up from under the afternoon’s prior consolidation, to above it. This degree of success during this timing window creates a bullish context. It doesn’t prevent a downleg (it might even invite it), but it does predict that the next downleg’s purpose is to refuel buyers.

The late-afternoon’s drop back to session lows took only 15 minutes. That’s a lot of selling pressure, in a short period of time, and not a very relevant time at that. The late drop may have been all about neutralizing the oversold RSIs at Thursday’s low. About that, and – according to the 3:10-3:20 window – about refueling buyers.

None of which is a buy signal, not without producing enough of a bounce, recovering at least 1049.00-1050.00. Thursday’s 1061.75 pre-open high would the minimum objective.

Meanwhile, dropping much further to test 1040.50 would be difficult to recover. Then, the impending weekend would become significantly more important than Thursday’s 3:10-3:20 timing window. Little or no support would stop the decline before touching 1026.00 or 1018.00.

Bottom line (My underlying premise)
The neutralized oversold RSIs left no unfinished business below. The late drop was sponsored by weak hands, perhaps weaker hands than those sponsoring the bounce it retraced. And the late bounce’s timing suggests it was all about preparing for a bigger rally effort. There’s no time ahead of the weekend for new lows to range sideway, or narrowly. If a recovery isn’t being attempted early, a bigger downleg would become much likelier. [/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.