Trading Plan for 8/5

If it’s Saturday… then it’s time for the weekly Saturday Strategy Session reminder. Please join us at 9:30am ET, from the link found in the blog’s sidebar.

Pattern points… (Setups and technicals)[pay]
Not that sellers put up much opposition Friday, but buyers at least were patient. The Employment Situation report’s 8-point plunge was modest, only testing Thursday’s 1696.00 post-open low. Optimists would have been excused for their excitement, but a relief rally wasn’t obvious soon after the open. So there was no morning rally, at all.

Buyers repeated their patience later after recovering to range around unchanged at 1701.00-1702.00. The narrow ranging continued around unchanged for several hours — well into the final hour.  Buyers didn’t remain patient through the close, which was met by a last half-hour surge through Thursday’s highs. Bullishness lost some of its potential.

 

Patient buyers are the market’s source of potential bullishness. So long as sellers gain no traction for their efforts, pent-up buying pressure can keep the trend alive. “Unfinished business above” is also a form of potential bullishness, attracting price higher. Friday’s “unfinished business above” at 1706.00 was attacked to within 1 point, losing some of its potential, too.

One more potentially bullish factor is a breakout, like Thursday’s sudden rally out of a range to close above prior highs. A second consecutive higher close would confirm, as did Friday’s close 1704.50. But that is within 3 ticks of Thursday’s prior high, which doesn’t reflect quite as much buying pressure as a confirmation could. That’s a little less potential in the bullishness.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Friday’s same narrow margin of victory to confirming Thursday’s breakout is less relevant to producing a new trend high close. Trends tend not to peak into a weekend, so Friday’s new high close suggests that an immediate pullback would recover for at least one more new high close. And an immediate pullback would not be surprising, with bullishness having lost so much potential on Friday.[/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.