Trading Plan for 7/20

Light at the end of the tunnel… seemed to appear in the debt negotiations. It’s an oncoming train, but it isn’t very frightening. The market meanwhile trekked higher ahead of AAPL’s post-close earnings. A negative reaction to any high-profile earning would be much more frightening than the capitol’s theater. [pay]

Pattern points… (Setups and technicals)
Monday’s hold long through the close above 1300.00 lost confidence when futures dipped after the cash session close. But that did prove to be only last-minute shakiness ahead of post-close earnings. The result was an overnight rally that extended higher intraday.

Was the rally a one-day wonder, or was it a taste of things to come?

The open created a gap back to 1301.00, which will want to be filled, since Friday’s prior highs weren’t recovered until the afternoon. And the intraday high tested critical resistance up to 1323.50, which wasn’t probed until the last hour had begun, and then only briefly. Testing the decline’s 1292.25 target has been pretty productive, already.

Tuesday’s close was in the process of testing a critical level. Wednesday’s session is vulnerable either to extending strongly above its resistance, or else to reacting down violently from it.

What’s Next… (Outlook and opportunities)
There is room for noise to fluctuate around 1323.50 up to 1325.00. Not yet reacting down from 1323.50 – having only consolidated under it – suggests that 1325.00 will be tested, too. Its recovery would extend the rally by 5 points, and possibly by 15 points. But failing to hold the noise range’s lower-end at 1319.00 could snowball into retracing all of Tuesday’s gain, and possibly resume 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.