Trading Plan for 8/5
The 13-point rally’s peak was familiar at ESu 1260’00, but it also measured a 61.8% retracement back into Friday afternoon’s trading range. This means there is no reason to retest Monday afternoon’s 1260’00 high unless intending to extend higher – either to 1265’25 or to 1272’50.
Meanwhile, the 14-point plunge pierced the morning’s low, and didn’t close decisively under 1249’00. Any lower would have all but required trending down at Tuesday’s open. It could still happen, and the odds still favor it anyway, next targeting either 1241’00 and 1234’00. But any break probably needs to happen early Tuesday or else wait until the afternoon, after the FOMC announcement.
Indicators and Internals.
Oversold 3-minute RSI at Monday’s low requires that it be retested, regardless of the interim bounce. And although internal spreads were weighted evenly, that might be equally bearish. Two times more NYSE down volume than up volume produced two times more declining issues than advancers. The spread itself doesn’t require rewarding buyers for any relative productivity. But neither does it contradict or diverge the price decline.
Tuesday’s opening setup.
The FOMC interest rate announcement doesn’t come until 2:15. Two retail metrics are released pre-open, followed by the ISM Mfg report 30 minutes after the open. The timing tends often to accelerate or else reverse any initial trending. It will be interesting to see what degree of trending is possible with the FOMC news just hours away. That news is likely to surprise any trending opposite the direction of the current decline, but I’ll certainly have some parameters available going into the afternoon. [/pay]