Trading Plan for 8/5

If Monday’s rally was sponsored by weak hands… then it’s more vulnerable to reversing down than to extending higher. And since Monday afternoon’s buyers gained traction, reversing down immediately requires gapping down substantially. So, not gapping down Tuesday…

Pattern points… (Setups and technicals)[pay]
Monday morning’s 1914.00 target was met within 3 ticks, which was close enough to neutralize it. That doesn’t make the near miss any less optimistic. The steep reversal up was only more so, as was its extension through resistance during the no-bias environment. The origins of the optimism reflect weak-handed sponsorship — potentially / eventually bearish from a contrarian perspective.

None of which prevents extending higher. All of which warns that reversing down will be done aggressively.

Monday afternoon’s bias environment was exited above the noon hour’s high, and the final hour was entered higher. Buyers did gain traction, so reversing down immediately must be done by gapping down. Not indicating a gap down Tuesday would all but require extending Monday’s rally — weak-handed sponsorship, strong, sellers would be marginalized through Tuesday morning’s bias environment.

At least a retest of Friday’s lows remains likely one way or another, if not also resuming the decline. Friday confirmed Thursday’s trend change, requiring a third lower close, and giving buyers the freedom to be refueled. The question is whether Monday’s bounce fully refueled them.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Tuesday’s econ calendar isn’t lacking potential catalysts, before attention turns to Thursday’s BOE and ECB meetings. [/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.