Trading Plan for 8/4

[pay]About that close (How the prior session ended)
Tuesday’s last hour dragged down to fresh afternoon lows at 1114.50. But it wasn’t due to breaking 1118.00 support, which didn’t break under after the last hour had begun. And it wasn’t due to the 3:10-3:20 timing window, which did trend down, but not to fresh afternoon lows until after consolidating. And it wasn’t due to RSIs, since 1-minute was diverging positively.

Without any distribution, reaction or deterioration to justify the dip, it was recovered. The close found itself attracted right back to the relevant 1118.00 level.

Pattern points (And technical influences)
The morning’s wild swings happened early enough that there was ample time to absorb their shock to the system. The last hour’s trending attempt had an open door to extend. That it did not, and that it bounced sharply from testing support, suggests that more volatility is coming before trending begins.

But Tuesday’s close at the relevant 1118.00 level does represent equilibrium. Like Friday’s close that ended while testing the equally relevant 1108.50 level, only a sufficient gap up or down can avoid choppiness Wednesday morning. This is essentially either a gap up above 1123.00, or under 1113.00. Anything less pronounced would likely reverse back and forth between positive and negative territory until the noon hour.

Monday’s pattern was likely to produce fresh highs Tuesday. Still holding the 1118.00 area at Tuesday’s close does leave the door open to a fresh high Wednesday. This still is not required, and won’t be, but a fresh high during Wednesday morning’s ranging could produce a downleg in the afternoon.

Bottom line (My underlying premise)
Sellers could have taken control Tuesday afternoon, but did not. That isn’t bullish, but it does suggest there may be some unfinished business above that must be neutralized first. I’m willing to sell a deep enough opening beak, but otherwise there is still some potential to probe higher highs. And in that potential there is always more potential for buyers to gain traction.[/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.