Trading Plan for 9/4

[pay]Pattern notes.
Thursday afternoon’s ranging finally gained traction with a rally into the close. It began after the no-bias environment had lapsed, so it doesn’t require being retraced. And it began after the afternoon dip’s target was essentially met, so there isn’t any recent unfinished business below – not from this particular leg.

However, the session did create other objectives that require fresh lows. The morning’s no-bias environment was triggered after testing the bias-up signal, making its 990’50 bias-down signal likely to be tested. While coming within 3 ticks of fulfilling this objective, the morning’s low touched Wednesday’s pivotal low (i.e. the low prior to the actual low). This requires the 991’00 actual low to be probed, too.

There was no requirement to retest the 1004’25 pre-open high, but there is an attraction back to it. Thursday afternoon’s rally to new session highs came close, making the retest all the more likely. If this attraction can prevent Friday’s open from probing fresh lows, an intraday rally could test “higher prior lows” around 1015’00. A downleg’s normal path down would include this, neutralizing the “higher prior lows” attraction before working lower.

But then, the normal path down doesn’t delay correcting a steep, deep drop like Tuesday’s slide. A normal corrective bounce may have been replaced by a series of smaller intraday bounces since Wednesday’s low. We’ll know so at Friday’s open because it will be probing fresh lows. Don’t forget that Thursday’s open snatched defeat from the jaws of victory when it failed rejected gapping up above prior highs. The closing probe above prior highs peaked at the “sleeper highs” once again, so buyers haven’t yet regained traction.

Indicators and Internals.
Both 1-minute and 3-minute RSIs were overbought when Thursday afternoon’s rally peaked, too late to be influential. Nevertheless, RSIs diverged negatively on its retest after the Globex open. The 3-minute RSI was at its lowest oversold when Thursday afternoon’s dip bottomed, requiring its retest.

Friday’s opportunities.
The Employment Situation report is the only econ report on the calendar. It’s been quite awhile since it monopolized the day. And the market is rarely tasked with absorbing such weighty news ahead of a three-day weekend’s illiquidity. Similar to Thursday’s session-long rally setup, maintaining a gap down Friday under Thursday afternoon’s 994’00 low would signal a session-long decline. This being a Friday, the morning’s bias tends to persist through the noon hour. So a no-bias signal would still leave potential to trend during the session’s last 90 minutes. [/pay]