Trading Plan for 7/18

It’s difficult to criticize… an complete intraday recovery from sharply lower lows.That describes most of Tuesday’s pattern. Not that a drop can’t begin without hesitation. But the retest of prior highs just got a much bigger benefit of the doubt.

Pattern points… (Setups and technicals)[pay]
Tuesday’s late drop came too late to be predictable. The bias environment’s exit above the noon hour’s 1356.00 high was not confirmed. In fact, a blip-up to fresh highs at 1360.50 just before the final hour reacted back down to fresh lows. The 3:10-3:20 window failed to save the rally effort.

The 3:10-3:20 window also failed to exploit the blip-up into a reversal down. Closing under 1353.00-1355.00 would have sealed a top, but its support was only attacked. Closing above 1356.00 did confirm that sellers gained no traction for their late effort, but buyers did not regain traction.

Oversold RSIs at Tuesday’s 1339.25 low require a retest. Gapping down Wednesday or immediately breaking under 1353.00-1355.00 would probably put it into play. Any less opening weakness — or maintaining opening strength — would resume the recovery targeting 1370.00/1375.00.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The first day of Humphrey-Hawkins testimony doesn’t always generate a reaction. When it does, maintaining that reaction through the close (like Tuesday) tends to be in anticipation of the second day’s testimony triggering the same reaction. It rarely does — at this point, Bernanke can only reinforce what drove price lower initially, or walk back what ultimately softened its initial blow. We’ll keep that characteristic in mind as Bernanke clears his throat.[/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.