Trading Plan for 8/31

[pay]About that close (How the prior session ended)
Monday’s session trended down throughout every relevant timing timing window. The last half-hour’s drop was its steepest and more productive. It contained the last 25% of the 28-point drop from overnight highs. And it was the first time 3-minute RSI probed oversold territory since overnight.

Pattern points (And technical influences)
Monday’s decline had already covered a lot of ground before the last half-hour. Then the drop’s pace accelerated throughout the last half-hour. That reflects long positions exiting into the close. It’s not very productive timing for sellers to gain traction, so it tends to expend more energy than it creates.

Sunday night’s probe above Friday’s highs was rejected by opening back under Friday’s highs. This allows the session to be considered an inside day. Session-long trending on inside days is normally followed by a move in the opposite direction. That suggests Tuesday will trend up.

A bounce has room up to 1051.00 before gaining enough traction to trend up through the morning. Recovering the 1055.50 area would next target 1059.00. Regardless of whether a rally began by gapping up to leave unfinished business back to Monday’s close, Tuesday afternoon should already begin rejecting the bounce.

Tuesday might simply extend Monday’s drop to probe last week’s lows under 1037.00. This would be too much selling pressure too soon to rely upon extending much further. And the impending three-day holiday weekend would help a more durable bottom to form.

Bottom line (My underlying premise)
Tuesday’s econ calendar is fraught with danger, so the morning should be volatile. The afternoon’s FOMC Minutes should inhibit any earlier trending from extending. Regardless, the next trending attempt is likely to be false, unless it gains traction by closing beyond a prior high or low. [/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.