Trading Plan for 7/16
[pay]About that close (How the prior session ended)
A 3-point bounce ahead of Thursday’s close became a 14-point surge. The 3:10-3:20 drop to fresh afternoon lows had ignored 1084.50 as support, requiring a bounce to acknowledge it as resistance. Some resistance. “Positive” news from Goldman Sachs to the Gulf of Mexico exacerbated the bounce. So did expiration’s influence, sending price up to 1095.50. It was a perfect storm. But it was not accumulation.
Pattern points (And technical influences)
The 3:10-3:20 window dropped to fresh afternoon lows. This setup might launch a recovery attempt, but not a durable recovery. The late bounce up to 1084.50 should have triggered a drop to fresh afternoon lows. The “perfect storm” only made the bounce bigger. The bounce might take longer. But it is still just a bounce, having originated from the 3:10-3:20 drop to fresh afternoon lows.
Thursday closed at or under 1093.00 for the third consecutive day. Buyers once again failed to gain traction. Intraday action could probe higher highs above 1098.00 resistance – perhaps this time even close above it. But the origin of such strength already characterizes that strength as being likely to resolve down.
Just as a gap down under prior lows can reject the surge, a gap up above prior highs could reject its tainted origin. Pre-open news might yet do that. A negative reaction to Google’s earnings hasn’t sent futures down. Maybe that’s because overbought RSIs at the surge’s 1095.50 high require its retest.
1095.50‘s retest can be neutralized overnight. Reversing back under 1087.00-1088.00 would then signal momentum reversing down. Alternatively, Thursday’s late surge can be rejected by gapping down Friday, at least under 1084.50. A new downleg would be underway once 1082.00 were to break as support.
Bottom line (My underlying premise)
No matter how impressive Thursday’s late bounce was or becomes, its origin is tainted. If a big enough gap up overcomes that, expiration’s influence could exacerbate the reaction further. Regardless, another upleg here would only extend the bear market rally.[/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.