Trading Plan for 7/19

[pay]About that close (How the prior session ended)
When expiration clenches something in its jaws, it just won’t let go. The open’s trending and the morning’s bias-down extended lower through the noon hour. The afternoon’s bias-down fell into the last hour. And the 3:10-3:20 timing window probed fresh session lows.

Friday’s last 45 minutes only ranged sideways. But it ranged sideways around the 1060.00-1062.50 target area, which also wouldn’t let go. It’s unlike the prior three days that tested the rally’s 1093.00 target. Its tests pushed back into the close, so buyers lost traction. Sellers didn’t lose traction after Friday ended while still testing 1060.00-1062.50.

Pattern points (And technical influences)
Expiration is done, but its traces linger on through Monday morning. Often its characteristics are duplicated – big down Monday morning follows big down Friday. Occasionally the price action is mirrored, which in this instance would produce a morning-long bounce.

Big down, or big bounce. Neither resolution seems very likely after Friday’s late consolidation formed a Symmetrical Triangle. The pattern tends initially to break falsely in one direction before reversing more substantially in the opposite direction. Trending momentarily in one direction doesn’t fit the normal resolution.

Symmetrical Triangles have an exception. Since the pattern is essentially a congestion of overlapping bars, it forms a mass that has its own gravitational pull. The only other way to break free from it is to gap open beyond its orbit. The minimum requirement is 61.8% of the triangle’s middle swing – that’s either 1066.50 above, or 1056.50 below. (Levels depicted on chart to the left.)

Gapping up sufficiently would trigger a significant retracement of Friday’s drop. But only a retracement, and only temporarily. Gapping down would resume the decline, next targeting 1040.00-1041.00. Both 1-minute and 3-minute RSIs were oversold at the last hour’s low. Its retest should be part of any scenario, whether immediate or eventual.

Bottom line (My underlying premise)
Regardless of how Monday plays out, last week’s pattern has to be recognized for reversing the trend to down. Its close under last Monday’s prior low now has every right to extend down without interruption. Delaying the decline longer than temporarily, or falling only slightly further, would undermine whether the corrective bounce had in fact ended.[/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.