Trading Plan for 7/1

If Friday’s late plunge were up instead of down… then would the rubber band have been stretched even further? Perhaps not, with that indicating a close above relevant resistance. Now the recovery requires recapturing Friday’s late plunge, and then extending as much higher. The alternative could be more damaging than just a plunge.

Pattern points… (Setups and technicals)[pay]
Friday’s action was an interesting juxtaposition to the three prior consecutive sessions. Each had gapped up and ranged exclusively in positive territory. The two most recent sessions had avoided overlapping the prior day. Friday’s pattern gapped down and probed the two-day old session. Bouncing back into the interim range never recovered a prior high.

The most important similarity is that Friday’s pattern also left outstanding no unfinished business above. Of course, that means something different for a day that defends its gap down, than it does for a day defending its gap up. But buyers gained no traction for their efforts.

Buyers gained no traction for their efforts in any of the three consecutive gaps up. But they stretched the rubber band tighter and tighter. And they left no “lower prior high” untested on the way up, creating an air pocket for the way down. Friday’s opening and closing slides were examples of air pocket behavior.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Friday’s close was back in or under 1598.00-1600.00 support. here was no bullish reason for retracing so deeply, but not closing under it by more than 3 ticks prevented considering a hold-short setup. A short-at-Sunday night’s open could still be considered if there is any hint of extending almost any lower.[/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.