Trading Plan for 7/19
Monday’s afternoon-long rally… expended a lot of buying pressure, without gaining traction for the effort. Extending higher immediately Tuesday would be credible, but not extending higher immediately would at least invite another downdraft.[pay]
Pattern points… (Setups and technicals)
Monday morning was likely to duplicate the “wide-ranging” character of Friday’s expiration. Any early indication otherwise was likely to trend sharply. For example, triggering a bias signal would have signaled trending. Actually, both bias down parameters were being probed well before the open, so exceeding the bias-down target renewed the bias-down. And the morning trended down.
Then the morning ended, upon testing the 1292.25 target (by 1 brief point).
The only outstanding requirement was to test last week’s 1295.25 overnight low down to 1292.25. Bouncing first from 1297.75 would have refueled the decline so it could extend below 1292.25. But 1292.25 was tested without refueling, making it difficult to extend down.
In fact, a sell signal at 1303.00 was only touched, but not triggered, launching instead a bounce back up to 1301.50.
A rally could get underway because the decline has held a test of its 1292.25 objective. Also because the Wednesday mildly bearish expiration signal did extend to lower lows coming out of expiration. Not rallying immediately would be bearish.
What’s Next… (Outlook and opportunities)
Holding long through the close would have been compelling above 1300.00, and the cash session did close above 1300.00. But it wasn’t compelling enough to avoid dipping to 1298.50 before the futures close. Perhaps a higher close just inhibited ahead of IBM’s post-close earnings, but that’s an ongoing problem during the quarterly earnings period. A corrective rally could reverse down from 1308.00, or from 1315.00. But no corrective rally is even required before resuming the decline. [/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.