Trading Plan for 7/15

If new highs are going to send the market back down again… then new highs should be attacked aggressively. Sunday’s night-long steep rally fit that description. Monday’s sideways ranging did not. At least, not exactly. While a fresh high didn’t extend, neither was it rejected — only retraced back into the range. Buyers gained no traction, but neither did sellers.

Pattern points… (Setups and technicals)[pay]
Sunday night’s extreme sentiment wasn’t a sentiment extreme. That’s always a risk coming into the new week. Usually, though, the sentiment is extended if not rejected. Monday’s session only ranged sideways.

No new sponsorship was attracted to the rally. Nevertheless, the burden of proof remains on sellers. A hold short wasn’t signaled, although an overnight or opening pullback might be needed to kick start another upleg. A kick start isn’t necessary, and is only a possibility. It isn’t even as likely as rallying straight through the open.

Remember that retesting the high this week would be most likely on Tuesday, and then most likely to close down Wednesday. Remember also that Yellen’s two-day congressional testimony begins Tuesday, along with more high-profile earnings — Monday’s narrow range should become a distant memory.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The closer this rally flies to the sun, the more vulnerable it becomes to attracting sellers. That also goes for moving away from the sun, dropping further below the prior high without first testing it. A fresh high remains likely, but Monday not improving on the open’s extreme sentiment is a bit too complacent for comfort at these levels.[/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.