Trading Plan for 8/6
If not for Putin’s maneuvering… then Tuesday’s plunge might have been much deeper. Huh? True, the news was the catalyst for Tuesday afternoon’s dive. But that originated during the no-bias environment. Sellers during that timing window are weak hands. And now they’re trapped.
Pattern points… (Setups and technicals)[pay]
Fresh lows were so unlikely on Tuesday, that it required the assistance of the Russian army. The decline was likely to resume at some point, and still is. But not with any urgency — not after gapping down and ranging sideways (widely, but sideways) all morning.
No other bounce was required before extending down, and the gap back to Monday’s close didn’t require being filled. Only a little more time was needed before a new downleg could begin. Only a little more time would have produced enough disappointment in the latest dip not recovering as usual.
Tuesday afternoon’s plunge restarted the clock. The latest low is only a couple of hours old, so it’s premature to yet become disappointed in it not yet recovering. It was a knee-jerk reaction to news, the product of weak hands whose impatience would have caused a bounce to fail — now having sold, their impatience can only instigate a rally.
So, sellers can be productive, but they remain vulnerable to recovery.
There is also the issue of “no-bias trending.” Tuesday afternoon’s 1923.00 bias-down signal had held as support through 1:20 to avoid triggering. A bounce was underway before the headline hit. Although the plunge never recovered the 1917.75 bias-down target, 1923.00 is still the likeliest attraction so long as another bias-down doesn’t trigger.
[/pay]What’s Next… (Outlook and opportunities)[pay]
One other element is the Thu-Fri trend change signal. It requires at least one future lower close. Tuesday was a new low close, but the close was above prior lows. It does not fulfill the trend change signal’s minimum requirement. The right/wrong headline can still resume the decline in bigger ways than we’ve yet seen. But the current range is meanwhile vulnerable to being retraced… Be sure to watch Tuesday’s Market Wrap for a visual discussion of the above concept. Don’t hesitate to ask questions in this post’s comments section on the blog. [/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.