Trading Plan for 8/6

[pay]Pattern notes.
After Wednesday’s opening dive, the morning’s bounce peaked at 996’50. That’s being tested as support two hours into the overnight Globex session. The afternoon’s interim 7-point gain to 1003’75 is gone. Is it a precursor to also retracing the morning’s 5-point bounce?

Traditions don’t last long in the market. They tend to start pretty quickly, and can appear often in a relatively short time frame. Buyers recently established a new tradition of probing higher highs without closing above prior highs. The past three sessions have traded around last Thursday’s 994’00 high – the interim session traded below it without letting sellers gain traction.

Coming into the market so easily, traditions also don’t last very long. Last week’s first three sessions were “ineffectual pessimism” that stopped suddenly with last Thursday morning’s surge to 994’00. Now this week’s first three sessions have formed a type of “ineffectual optimism. Is this new tradition about to end suddenly?

Wednesday’s entire intraday recovery never turned positive on the day. And now Wednesday afternoon’s gains have been retraced entirely back down to 996’50. Extending the drop overnight back down to yesterday’s lows would suggest old traditions had been retired again. The new tradition’s purpose would be to retrace the relentless upleg from July’s lows. Regardless of direction, it’s about time for a new tradition. So, gapping up Thursday up above recent highs would suggest the new tradition was all about resuming the rally’s steeper slope, well beyond the 1005’00 or 10015’00 levels.

Indicators and Internals.
1-minute RSI was barely overbought at Wednesday afternoon’s high, which would have been simultaneously overbought with the 3-minute RSI. So no retest of Wednesday’s high is recovered. Meanwhile, RSIs have managed to avoid becoming oversold so far during 7 points of decline off of Wednesday’s high.

Thursday’s opportunities.
Any indication overnight of gapping down under 993’25 would probably be past the point of no return. Wednesday’s bounce would be considered entirely absorbed so long as bounces then held 997’00 as resistance. It would even reinstate Wednesday’s attempted gap down, which remains in-play as buyers never regained traction with a positive close. The likely alternative is not to remain within the recent range, but to gap up above recent highs around 1004’00 and extend sharply higher. Jobless Claims is pre-open, and any trending prior to that would be tentative. [/pay]