Trading Plan for 9/1
[pay]About that close (How the prior session ended)
Tuesday’s FOMC reaction fell from 1052.75 back under 1043.00. Recovering 1045.25 aggressively and substantially would have triggered a bigger bounce targeting 1049.25-1050.25. Three false starts eventually succeeded by surging to 1050.50. A reaction down to 1046.00 spiked up to 1053.00 after the cash session close.
Pattern points (And technical influences)
The FOMC reaction from 1052.75 was never likely to gain traction to become a bigger downleg. It could have bottomed at 1049.00. Consequently, I had no sell parameter. That was frustrating as the drop extended down to 1042.50.
But the decline had the feel of being just that – a reaction. Ultimately the analysis was vindicated by its complete retracement. The pattern’s next higher target 1055.50 could still be fulfilled, too. Overnight would suffice. If not rejected, the bounce could extend higher to 1059.00-1060.00.
Tuesday’s cash session close equated to 1047.75. Opening Wednesday’s cash session under 1047.75 would negate any traction of the post-close spike up. Regardless of any higher highs overnight, opening under 1047.75 would reverse momentum down.
Dipping to fresh lows under the 1037.00 area intraday Tuesday would have run out of sellers. Instead, probing fresh highs ran out of buyers. Recovering from fresh lows would have attracted buyers for a bigger rally into the three-day holiday weekend. Instead, failing to extend higher Wednesday morning would help to begin the next downleg targeting the 1023.00 area.
Bottom line (My underlying premise)
Tuesday morning’s recovery started with a surprisingly favorable econ report. A modestly favorable surprise followed it. And then another. That’s some sort of pattern. Another favorable report Wednesday might not have the same effect. But negative surprise might be needed to trigger a decline. A decline into the weekend should be evident sometime Wednesday morning, or it might not happen at all.[/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.