Trading Plan for 8/7
[pay]Pattern notes.
Thursday’s opening surge tried and failed the same breakout that stopped Monday’s similar opening surge. And similar to Monday, the post-open pullback bottomed at 990’00, last Friday’s “lower prior highs.” Thursday’s drop started from almost 1008’00, while Monday’s opening surge peaked under 996’00. Interestingly, Thursday’s bounce from session lows peaked upon testing 996’00.
Monday’s 6-7 point dip pales in comparison to Thursday’s 18-point swing. Originating at higher levels helped to absorb Thursday’s bigger drop, and inhibit sellers from gaining traction. Session lows chipped away further at 994’00 support, as did the prior two days. Any trending down Friday must at a minimum break this level through the open. Any trending up must immediately recover above the first test’s reaction high at 999’00.
More than one full week has been spent ranging around 994’00. Its the longest such string of the rally from July’s lows, and a long string for any rally. It’s a little long for credible trending, but appropriate action for topping. Sellers must take control soon, or else the market will suck in buyers to fill the void with a steep rally leg. Look for a “bigger picture” update this weekend regardless of Friday’s resolution.
Indicators and Internals.
Technicals left no unfinished business Thursday. The afternoon’s low narrowly avoided printing with an oversold 3-minute RSI. That would have been in tandem with oversold 1-minute RSI, requiring the low’s retest. But there’s no technical requirement otherwise to retest Thursday’s low.
Friday’s opportunities.
The aging tradition I described here yesterday is now all of five days old. Yet another opening probe of prior highs is unlikely, especially from the range’s lower-end. Less likely is rejecting another probe of prior highs. The same could be said for a failed break under 994’00 – that its break is unlikely to recover yet again. Thursday’s close was still testing it as support, so an attempt to break lower is likely. Much depends upon whether that break is preceded by a bounce in reaction the Employment Situation report.
Reaction to the report will set the open’s tone, but not necessarily for the day. This being a Friday, the morning’s bias tends to extend through the noon hour. A no-bias signal would make trending unlikely until the session’s last 90 minutes. By the same token, trending early enough in either direction could extend into late-afternoon before turning sideways. [/pay]