Trading Plan for 7/13

Try, try again… Tuesday’s overnight plunge was recovered to open above Monday’s lows. Monday’s lows held as support through Tuesday’s last minutes. There was plenty of opportunity to convert the pre-open recovery into a bullish intraday rally. Failing to exploit the opportunity once is not bullish. Failing to exploit it again is bearish. [pay]

Pattern points… (Setups and technicals)
Tuesday morning’s 1314.00 bias-down signal was recovered to signal no-bias, putting into play a test of the 1323.75 bias-up signal. Not rejecting 1314.00‘s recovery through 11:30 made 1323.75 unfinished business above. It was attacked to within 2 ticks by the QE3 surge.

Overbought RSIs at 1323.25 require its retest. Presumably, 1323.75 would be touched at that time. Meanwhile, its outstanding test won’t necessarily prevent a decline. In fact, Tuesday’s reaction down from overbought RSIs retraced all of the QE3 surge from 1314.00. Then fresh lows tested 1309.00.

Recovering 1312.50 and 1316.25 would signal and confirm momentum reversing up to retest 1323.25. But almost any further weakness would next target 1302.00-1303.00 – and either another opportunity to trap sellers, or a new phase of selling to sharply lower lows.

What’s Next… (Outlook and opportunities)
Three consecutive gaps down have closed under the prior session’s lows. Tuesday qualified in its final minutes. A firm open would allow the morning to attempt another rally – to 1323.00-1325.00. Fresh lows testing 1302.00-1303.00 would either rally back significantly, or else extend down sharply to 1282.00. [/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.