Trading Plan for 8/3

Thursday’s close ultimately held… a test of what would define a pullback from Monday’s high. It was the deeper of two pullback limits. Recovering back above the other would now suggest the pullback had ended. Otherwise, that probably wasn’t a pullback.

Pattern points… (Setups and technicals)[pay]
Thursday afternoon’s 13-point rally peaked at 1362.50 into the futures close. However, buyers gained no traction for their effort. The cash session close was contained solidly within 1360.00-1361.00, essentially an “equilibrium” close that neither recovered nor rejected the relevant level.

Oversold RSIs at Thursday’s 1349.25-1350.00 noon hour low require a retest. Its test down to 1348.25 is likely to be Friday morning’s objective if the does not recover immediately above 1366.00-1367.00. That would be the bullish scenario, to quickly neutralize the unfinished business below, and then rally through the afternoon.

Since Thursday’s close recovered back above the morning’s lows, sellers gained no traction for their efforts, either. And at least avoiding a close under 1360.00-1361.00 prevented putting into play a lower target. The rest of the bullish scenario still requires closing back above a relevant level, such as 1366.00-1367.00.

The bullish scenario’s early stage looks a lot like the bearish scenario. Failing to hold above Thursday’s lows through Friday’s open would likely trend down into the afternoon. “Lower prior highs” at 1338.50 and a gap back to 1333.00 would attract sellers into and out of the weekend.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This being a Friday, the morning’s bias signal is likely to persist through the noon hour. Equally important to the Employment Situation report’s reaction will be how much of it is absorbed or extended into the open.[/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.