Trading Plan for 7/2

If Sunday night’s rally intended to gain traction… then it should have allowed a pullback during the morning. Instead, that time was spent treading water, expending buying pressure just to maintain the gain, delaying the drop until the afternoon. Now extending the rally depends upon immediately recovering Monday afternoon’s drop.

Pattern points… (Setups and technicals)[pay]
Sunday night’s rally all but rejected Friday’s drop from its 1609.50 highs. Surging higher to 1620.00 through the open all but promised to marginalize sellers. The path down from a morning rally was obstructed by several hurdles.

But buyers never gained traction.

The morning surge peaked at 10:15, its overbought RSI was later neutralized. The afternoon’s no-bias environment fell as far as possible without expending selling pressure ineffectually under its 1612.50 bias-down signal. And the bias environment lapsing at 2:30 was greeted and followed by waves of previously pent-up selling pressure.

More pent-up selling pressure will be needed to do any more damage.

Closing at or under Friday’s 1609.50 highs does maintain the bearish scenario, keeping alive potential for Monday afternoon’s slide to retrace back to Friday’s 1594.25 low. But Monday’s late low fulfilled the afternoon’s 1606.00 bias-down target, and then bounced sharply. Not resuming the decline immediately Tuesday — this close to the holiday’s illiquidity — could marginalize sellers until Friday.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The late reaction up from the 1606.00 bias-down target was testing Friday’s 1609.50 highs into Monday’s close. Anything short of gapping up sharply Tuesday would suggest that sellers weren’t marginalized. At least, so long as Monday’s drop were to extend down sharply through Tuesday’s bias timing window. Meanwhile, having reacted up from 1606.00 Monday, Tuesday’s open is just as vulnerable to gapping up and extending higher. [/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.