Trading Plan for 7/12

There was no gentle path down Monday… The gap back up to Thursday’s close would have been filled if Monday’s open had avoided gapping down. But gapping down (under Friday afternoon’s low) triggered a session-long decline. The setup was fulfilled by printing its low during the session’s last hour. Trending down sharply intraday was another matter, altogether.[pay]

Pattern points… (Setups and technicals)
A session-long decline can also trend down into the close, if fresh lows are printing early enough. Monday’s fresh low was a single errant tick under 1312.00, and printed at the last possible moment, if that early. Instead of trending down, the close trended straight up to test 1319.25.

The last-minute rally was just noise in the range back to the noon hour’s 1319.75 high. All of the late-afternoon’s pent-up buying pressure was released, instead of letting it grow overnight to launch a rally Tuesday morning. And releasing the pent-up buying pressure did not gain traction for the effort by closing above a prior high.

Nothing about Friday’s very last-minute bounce signaled momentum reversing up, and it has nothing to do with the size of the drop. Price rose upward, while momentum did not reverse up, stretching the rubber band tightly. Extending down would next target 1307.00-1308.00.

What’s Next… (Outlook and opportunities)
The rubber band could break upward, instead of snapping back down. That all but requires gapping up and immediately recovering 1330.00. Any lesser opening strength could follow-through, but only temporarily. And a weaker open need not duplicate Friday and Monday’s gaps down in order to extend down sharply.[/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.