Trading Plan for 7/11

Tuesday’s drop has its choice… of scapegoats: PFG positions being liquidated. German ruling on ESM delayed. CMI warns on earnings. Regardless, the market has been toppy. And now potential to retest last week’s highs is in jeopardy.

Pattern points… (Setups and technicals)[pay]
Friday and Monday’s closes back above 1346.00 had prevented sellers from gaining traction. It also made Tuesday’s open likely to gap up a lot if it were to gap up at all. pattern would also produce a significant morning-long rally. Tuesday’s open did gap up a lot, but that produced a significant session-long decline.

That inversion alone is a concern for the potential to retest last week’s 1369.00 and 1375.00 highs. Now closing under 1346.00 has put into play a test of 1327.00-1328.00 and potentially also 1322.00. And closing under Friday and Monday’s 1341.00-1342.00 lows has signaled momentum reversing down.

A second consecutive close under 1341.00-1342.00 lows — preferably under Tuesday’s 1330.50 low — would confirm momentum has reversed down. Closing back above 1341.00-1342.00 would invalidate Tuesday’s break.

The battle is on.

[/pay]What’s Next… (Outlook and opportunities)[pay]
An interesting setup through 3:10-3:20 Tuesday (described in the Market Wrap recording) suggests that a momentum low formed. Recovering from lower lows Wednesday could trap shorts back above 1335.00. Simply recovering 1341.00-1342.00 would make lower lows unnecessary before attempting again to retest last week’s highs. [/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.