Aug 03 Plan

I’ve attached two RTH only charts (Daily & Weekly) so you can visualize what I will explain on this week’s plan. As you can see, from a monthly perspective, the market has been One Time Framing higher since April. For this one time framing to end, sellers must advertise prices below 3089. I’ve been saying for the last couple of weeks that I expect stronger selling once prices are below my 3110 level. 

During the month of July, we saw rotation between two important Balance Areas. During the first half of July, this balancing occurred between 3110 and 3190; while during the second half of the month, we saw it between 3190 and 3267. 

3190 has continued to be an incredible area of support for the bulls, it is also an area where I suspect many sellers are trapped since there isn’t any meaningful excess to the downside and we continue to short covering rallies back to 3267. At the same time, buyers are having a hard time migrating value above 3267, hence the lack of meaningful excess to the upside. I know many are eager to go with the break out, reason for many to become trapped at poor location. 

I’ve said countless times that when the market is trading in a balance area like this one, the rule is to fade the extremes using a reversion to the mean strategy. 

If you look at it from a weekly perspective, you can see that last week was an “inside week”; meaning that the entire range traded inside the previous week’s range. On a situation like this, the rule should be to go with the breakout. Meaning long above the highs, and short below the lows. If this fails, then the play should be to target the other side of the range. From a weekly perspective you can also note that market has been one time framing higher for the last five weeks. Trading below 3195  (3190) will put an end to this one time framing. Stronger momentum sellers should take advantage of this element. Stronger sellers should take us to 3110; I would watch the action around 3155 to gauge their strength. Stronger sellers should trade through it without much pause.

If tomorrow opens on a gap up, rule should be to go with the gap. Stronger buyers should not let the gap get filled. My upside targets are 3290 and 3331. If it opens inside the previous day’s range use previous levels to gauge the sellers strength. 

I would like to note that there is a gap that happened in February from 3260 to 3328 that hasn’t been filled yet. 

As for NQ_F, I want to see it stay above 10,750.00, but more importantly I want to see the index make a new All Time High. It worries that after the FAANGs earnings’ announcements the index failed to go above the previous All Time Highs. 

Good luck to everyone tomorrow!