Trading Plan for 8/29

If low volume helps to retrace a sell-off… then will it hurt or further help a rally? New trending is difficult to start, and the prevailing trend is already up. Throw into the mix that three-day weekends often behave bullishly. The path of least resistance is up. Which tells us something about a drop…

Pattern points… (Setups and technicals)[pay]
That’s not to say another downdraft can be avoided. Recovering 1997.00 was the minimum requirement to consider a hold-long, but it held as resistance — first at the noon hour’s high, and then at the post-close surge. There’s also no attraction outstanding above, especially since Thursday’s recovery filled the gap above back to Wednesday’s 1996.75 close without closing above it.

Thursday’s last action was a 2-1/2 point drop to a fresh afternoon low at 1994.00 support. Its test earlier would have launched a new recovery leg. Testing it so late — that’s where the cash session closed — did react up sharply to 1997.25. But that was post-close, so it can’t be considered as reversing momentum up.

Rallying Friday must begin as a surprise. Thursday afternoon’s timing windows ranged too narrowly to create any urgency for resuming the post-open recovery. The 7-tick wide bias environment developed entirely within the noon hour’s range, and it contained the final hour’s entry. Buyers gained no traction for their efforts, so the only credible rally Friday morning would begin by gapping up.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Just drifting higher Friday morning would be vulnerable to another downdraft. Gapping up that is maintained through the morning can become a slow drift higher through the close. Another downdraft can’t be prevented, but it will have to be immediate and sustained to be productive at all before the weekend. [/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.