Trading Plan for 7/15

What goes up… Another failed opening rally was reversed down to overnight lows Thursday. This is getting to be a pattern, which means don’t expect to see it happen again, soon. Either resistance has been chipped away sufficiently to allow a rally, or – more likely – unfinished business below is in-play. [pay]

Pattern points… (Setups and technicals)
7:35pm ET Breaking news: S&P Places US ‘AAA/A-1+’ Ratings On CreditWatch Negative. So, what else is new? Just another fill-in-the blank detail, from a list of countries that everyone knows already. In fact, the 7-point spike down it triggered was retraced almost entirely after 30 minutes. Cumulative effects to ongoing downgrades are another story. But the near-term reactions continue to get ahead of things.

Wednesday’s expiration indicator was signaled while prior lows were still being tested. A clear signal would have triggered from either bouncing, or breaking. Thursday’s extension down suggests that the signal is down. This does not define any particular action at any particular time – it doesn’t prevent Friday’s open from bouncing through the morning. But any bounce should resolve down on the way to lower lows.

Speaking of lower lows, 1302.00 has been tested, retested and tested again, so even an obligatory bounce is unlikely if tested again. A retest of 1295.25 could produce a tradeable bounce, either from attacking it down to 1297.75, or from probing it down to 1292.25.

What’s Next… (Outlook and opportunities)
This weekend is a candidate for being anticipated fearfully. Fear can cut both ways, motivating a rush to the exits, as often as motivating a rush to own. A rally into the close could originate from fresh lows that have been probed throughout the day. Recovering above a prior high into the afternoon could trigger a short-squeeze ahead of the weekend. Otherwise, a less substantial intraday rally would probably attract much more selling pressure. [/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.