Trading Plan for 9/8

[pay]Pattern notes.
Did Friday’s behavior buck the trend, or follow it? The prior Friday’s open had gapped up to new highs on favorable news, but price then reversed down sharply. Since then, the market had become defined by more of the same: a favorable reaction to favorable news, soon rejected by price action dropping.

Friday’s news was bad, and the reaction was good, albeit eventually.

Has the market gone from bearishly selling off on good news, to bullishly buying good news? Or, instead of putting that sloppy phase behind it, perhaps Friday’s reaction was just another side of the same coin. The first scenario could be true, but the second scenario remains intact until the chart says differently.

The session’s rally is relevant to the chart. Of course. More relevant, though, is what that rally accomplished, or did not. Friday’s rally fulfilled the potential for a normal corrective bounce back to higher prior lows at 1015’00. Indeed, 1015’00 is the ultimate target of the last rally leg from July’s low and now it has held another test.

To be sure, the corrective bounce came at least a day later than normal. That can be explained – but not quite dismissed – by the seasonal influence of a three-day holiday weekend. And the bounce did put price within closer distance of gapping up above prior highs (green box and green highlight on the chart) to signal momentum reversing up.

But the scenario that took price down hasn’t been invalidated simply because its first downleg was corrected by a normal amount. Those same prior highs (in green) could also withstand a test intraday if no gap up occurs. And meanwhile, a break back under 1007’00 would at least probe last week’s consolidation at the lows. Either way, the holiday-shortened week may find the same urge as last week, getting big trending underway early.

Indicators and Internals.
The chart’s red box identifies Thursday afternoon’s low. Its 3-minute RSI was at its lowest oversold along with that 3-minute price bar. This requires a retest eventually. Closing under this level would essentially signal or confirm a new downleg underway.

Tuesday’s opportunities.
Friday’s U.S. rally might inspire global markets to follow suit, which could help Tuesday’s regular session gap up above prior highs. Bias parameters are available for the Globex session that trades through 11:30am ET Monday. The targets listed are aggressive, but 3-point moves would be likelier. Normal morning bias signals will be made available for Tuesday. [/pay]