Trading Plan for 7/10

[pay]Pattern notes.
Wednesday afternoon’s short-squeeze could have extended into a bigger rally by immediately recovering Thursday above Wednesday morning’s highs. That didn’t happen, but not for lack of trying. The open gapped up, the session traded entirely in positive territory, probing prior highs intraday. Buyers did not gain traction, since the close wasn’t above the prior afternoon’s high, or the current day’s morning high and noon hour low.

This “ineffectual optimism” is is temporary counter-trend action, part of a correction. It might be the entire correction. Thursday’s late, tempered weakness left selling pressure pent-up overnight. If the pent-up pressure is sufficient to resume the decline, then selling should be obvious Friday morning. The open would either gap down, or immediately fall from a flat or higher open, and then extend down sharply intraday, under Wednesday’s the 866’00 lows.

Buyers would regain control by immediately recovering above the same 881’00-883’00 area they failed to recover Thursday. Gapping up above Thursday afternoon’s 884’50 high would signal a session-long rally, its objective being to fill the gap back to 893’50-896’00.

Resuming the decline to close at new relative lows would be likely to continue dropping through Monday’s open. Just ranging sideways would be likely to range sideways through Monday, still vulnerable to resuming the decline Tuesday. A close above 881’00-883’00 can still trigger a multi-session rally, so long as Friday’s gain had not already filled the gap back to 893’50-896’00. What the market does at this stage of the pattern going into the weekend is much less important than what it leaves undone.

Indicators and Internals.
Thursday’s 3-minute RSI avoided becoming extended in either direction. The afternoon’s last-minute drop saw RSIs diverge positively. That’s too late to reflect credible, influential participants, at least not permanent ones.

Friday’s opportunities.
A modest bounce overnight to 881’00-883’00 wouldn’t require retest intraday Friday before reversing down. But its recovery could marginalize sellers for the day. Almost any early weakness in this pattern would be likely to ignore Thursday morning’s lows on the way to new lows for the week. Falling early enough would make the week’s lows much less likely to hold as support. The day’s highest profile econ report is the 9:55 Consumer Sentiment, timing that tends often either to reverse or to accelerate any initial trending already underway. [/pay]