Trading Plan for 7/11

[pay]Pattern notes.
Is it, or isn’t it? I refer, of course, to whether Thursday’s new lows mark the end of the decline, or at least the beginning of a corrective bounce. And if neither, then does the decline continue to probe lower lows, or plummet in “crash” style.

My opinion hasn’t changed, because the market hasn’t changed its behavior. I continue to observe instances of rallies stopping short of accomplishing anything durable. Thursday’s intraday recovery from the morning’s new low was followed by a dive back to the morning’s low. That’s 20 points each way, three times, and still no close above ESu 1257’00 to even begin signaling that buyers were gaining traction.

Thursday’s high was probed overnight, but that would have been more impressive if the recovery had originated from new lows, and not from barely touching the morning’s low.

Tuesday’s 1236’50 pre-open low has yet to be retested during regular trading hours, leaving unfinished business below the market. But that has begun paling in comparison to the bigger problem that two new lows have come within 1 point and 1/2-point of the prior-low, respectively. That’s optimism, and that’s not the stuff of bottoms.

I am still open to the potential for a multi-day corrective bounce to begin without completing a bottom – especially with the weekend approaching, and especially if sellers aren’t in control through any relevant timing window. But that would be the first price action down here to resemble accumulation. Everything else has only managed to absorb buyers, and then disappoint them.

Indicators and Internals.
20% more NYSE up volume than down volume produced 12% more advancing issues than decliners. The spread obligates Friday’s market to reward Thursday’s buyers for their relative productivity, even if only momentarily. The spreads aren’t very wide, and they seem quite small compared to the afternoon’s last upleg.

Friday’s opening setup.
An overnight surge to 1261’75 was launched from 1250’00, where S&Ps soon returned. That was odd. The surge probed prior sessions’ highs, making it vulnerable to retest – it’s not required, but it becomes likelier as more time passes without resuming the decline. The econ calendar has two relatively low profile reports at 8:30, and then Consumer Sentiment at 10:00. The latter report’s timing often tends either to accelerate or to reverse any initial trending already underway. [/pay]