Trading Plan for 7/18

If Bernanke cannot say anything more bullish Thursday than he said Wednesday… then the market probably cannot react any more optimistically. So, did Wednesday’s session range just to pass the time while waiting for the testimony to resume?

Pattern points… (Setups and technicals)[pay]
Wednesday’s opening surge erased Tuesday morning’s extended drop. That proved Tuesday’s selling was just defensive posturing ahead of Bernanke’s day-1 Congressional testimony. Yet, only a shallow post-open high followed, and then only momentarily.

Was the defensive posturing overdone?  Was the positive reaction to Bernanke overdone? Or, is the market juuuust right?

To the degree that QE and tapering effect the rally, don’t forget that day-2 of Bernanke’s testimony is Thursday. If he cannot say anything more bullish than he said Wednesday, then the market probably cannot react any more optimistically. Perhaps Wednesday’s post-open ranging was just passing time while waiting for that testimony to resume.

Meanwhile, Wednesday’s buyers gained no traction, despite gapping up and spending the entire session in positive territory. The final hour was entered under the bias environment’s low, and under most of the noon hour’s range. Having probed a fresh trend high intraday, this triggers a “passively bearish” Wed-EX indicator. Unless Thursday’s open were to gap up and extend higher, we’re not expecting an uptrend into and out of expiration.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Continually testing 1674.00 Wednesday is now know to have been chipping away at its support. Breaking under it would fill the gap back to Tuesday’s 1671.00 close, probably down to 1669.50. Otherwise, gapping up above 1678.00 would target a fresh high at 1682.50. [/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.