Trading Plan for 8/28
[pay]Pattern notes.
Seasonal bullishness can appear around a three-day holiday weekend, as participation thins out, making it difficult to generate sponsorship for trending. This makes the rally into Wednesday’s high interesting for having started so soon. Not from Tuesday afternoon’s low – although it is also interesting Tuesday’s sellers didn’t trigger the next downleg right then and there. The rally into Wednesday’s noon hour peak really began 7 hours earlier and 20 points lower.
I expect the seasonal bullish effect either to be very strong, or else inverted. If very strong, then Thursday’s open will already be at or above Wednesday’s 1285’00 highs, intent on filling the gap back to Friday’s 1292’50 close – probably higher intraday. If the bullish effect is inverted, then it has already ended, and Thursday’s open should already be slipping under 1278’00, on the way to 1267’25.
Unless Thursday’s close exceeds last week’s highs after filling the 1292’50 gap intraday, Friday’s session probably won’t trade too much higher before the weekend. Closing above last week’s highs could instead exploit the holiday’s thinner volume and possibly retest the month’s highs. We’ll see. Wednesday night’s Globex open certainly didn’t seem to mind that FNM and FRE haven’t yet gotten their heavily-rumored government bailout(s), and that’s somewhat bullish. But I wouldn’t hesitate shorting a support break if it appears.
Indicators and Internals.
The last oversold 3-minute RSI reading was neutralized minutes later at Wednesday’s last relative low. The 1-minute RSI positive divergence there has already been productive in the bounce it produced. Technically there is no unfinished business either above or below. Internal spreads reflected sellers more productive than buyers. But total volume has already started slipping ahead of the holiday weekend. So Thursday’s market isn’t necessarily obligated to reward Wednesday’s sellers for their relative productivity.
Thursday’s opening setup.
Jobless Claims and GDP at 8:30 might be called upon to incite trending. I’ll be interested in their timing, and whether S&Ps are probing Wednesday’s highs at the time, pulling back after piercing the highs, or already dipping down from Wednesday’s close. Afternoon volume isn’t going to get any better, and the dwindling participation makes it difficult to start or sustain trending. So any trending needs to be underway early if at all.[/pay]