Trading Plan for 8/7

If Tuesday’s drop had extended a little lower… then could it have already begun recovering before the close? That’s essentially the message being sent by not yet extending nor reversing the morning’s drop, despite leaving unfinished business above.

Pattern points… (Setups and technicals)[pay]
Tuesday morning failed to dodge tapering comments from one Fed head, quickly diving to discount the “news.” Fearing more of the same from other Fed heads soon to speak rightly kept the market under pressure. The market stopped falling before they stopped talking. But it never recovered.

The drop did recover from probing under “lower prior highs” at 1692.00-1692.50. Holding their test prevented sellers from gaining traction for their efforts. That, and closing above the morning’s 1688.75 low, not to mention the noon hour’s low. Meanwhile, new unfinished business above was created at the gap back up to Monday’s 1702.50 close.

Buyers didn’t gain any traction, either. Recovering Wednesday without first extending the dip would require gapping up, probably above Tuesday’s 1698.75 opening print — presumably to neutralize unfinished business outstanding above at 1706.00. Extending down first is a little likelier, in order to neutralize oversold RSIs at Tuesday morning’s 1688.75 low, presumably to 1687.00.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This Wednesday’s econ calendar isn’t irrelevant, and it’s difficult to see any more tapering comments being anything but more of the same.  But the burden of proof is on buyers, nonetheless.[/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.