Trading Plan for 8/30

[pay]About that close (How the prior session ended)
Friday afternoon’s no-bias environment had eked its way back to session highs. Limited selling pressure made the pattern vulnerable to a short-squeeze. The 1060.00 bias-up signal finally launched a 3-point rally at 2:30. But it lacked any big, consecutive up-bars, and it was retraced down to 1059.00. A 5-point rally from there did a little better to close at 1064.00.

Pattern points (And technical influences)
Friday’s choppy session ultimately rallied. And the rally was appropriate. But it included a lot of optimism that a durable rally might have wanted to suppress a little longer.

Friday morning’s dive stopped 1 tick short of touching Wednesday’s 1037.00 low. Somewhat oversold RSIs had improved enough to make the drop vulnerable to a bounce. But Wednesday’s low still should have been probed, and the difference reflects optimism.

Optimism was thick throughout the bounce, too. The bounce didn’t hesitate recovering positive territory above both Thursday’s 1044.75 futures close and its 1046.25 cash session close. A brief consolidation there was able to extend back to the opening highs. And only a shallow pullback preceded the next upleg back to Thursday morning’s ~1060.00 highs.

A price is usually paid for persistent optimism, eventually. But unchallenged weak hands can be productive at the right times, one of which is the week’s final hours. So, Friday afternoon easily ignored the 1-minute RSI diverging negatively, and cycled higher into the close.

The optimism might have a little more room to push higher at Monday’s open, but there doesn’t seem to be much more available. Friday’s late afternoon gains didn’t come in the form of an aggressive short-squeeze, which suggests the morning’s recovery wasn’t widely disputed. That reflects more optimism than pessimism. Recall that Wednesday afternoon’s rally was similar – it quickly released its pent-up buying pressure from the morning’s drop, instead of conserving it to fuel buyers at the next open. And the next open went nowhere, fast.

Bottom line (My underlying premise)
A push higher that ends soon after Monday’s open is likelier to be only a bear market bounce. The rejection need not produce new lows immediately to maintain the bearish scenario. Not being rejected early makes the bounce likelier to extend higher through Wednesday morning. That would become a problem for the bearish scenario, as a seasonally bullish three-day holiday weekend starts approaching. [/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.