Trading Plan for 8/4

[pay]Pattern notes.
A three-hour rally overnight nearly touched 997’00. It was still being touched ten hours later, thirty minutes before the close. The last half-hour bounced 5 points back up to the afternoon’s 1001’00 high. The hour prior to that was spent dipping 5 points. The late-afternoon’s 5-point range was centered around the morning’s 999’25 high.

If not for developing almost entirely above prior highs, Monday’s session would hardly be considered trending. Even the afternoon alone failed to range away from Thursday’s 994’00 prior high until after the noon hour ended.

Any trending momentum does require closing above Monday’s highs to confirm. Failing to do so wouldn’t necessarily give sellers traction – no more so than any previous unconfirmed breakout attempt. But no confirmation would create more ballast to accelerate the eventual rejection of new highs.

Continuing the rally depends less upon faster pace or steeper slope, and more on shallow pullbacks. Anything less bearish than a gap down under 994’25 would be likely to resume the rally, next targeting 1006’25, with potential to 1015’00. Slightly deeper opening weakness might rob buyers of their traction, but it wouldn’t necessarily give sellers traction by default.

The credibility of a more serious gap down would be earned by starting under a prior intraday extreme, like Monday’s 988’75 low. Thursday and Friday’s 982’00 lows would offer support, unless 984’00-985’00 produced an obligatory bounce, first. Otherwise, sellers don’t gain traction without a sizable intraday drop, preferably from first probing new highs.

Indicators and Internals.
RSIs ranged well within overbought and oversold throughout most of Monday. They were simultaneously oversold at the open’s 998’75 low, suggesting the level will be retested eventually. But there was no excessive buying or selling pressure through any other intraday fluctuation.

Tuesday’s opportunities.
The morning’s econ reports are evenly spaced from pre-open until a half-hour later. This should keep price action dodging, ducking and dodging – perhaps not trending at all. A new high that is retraced through the opening sequence probably wouldn’t gain any traction without big news pressuing price down. The burden of proof remains on sellers, and they have yet to deliver. I would still be suspicious of their first attempt to do so.[/pay]