Trading Plan for 7/21

Market Wrap discussed the bearish setup… which is already being attempted after the futures close, by a 5-point plunge to 1316.50. It’s the first reaction down from the 1323.50 bounce limit’s test. And if a decline doesn’t catch, then it could be the last.[pay]

Pattern points… (Setups and technicals)
Wednesday’s late-afternoon drop resumed after holding a test of the 1323.50 bounce limit. That made it a productive bounce limit. Its relevance needed no further confirmation.

1323.50 was the bigger picture’s bounce limit after testing the decline’s 1292.25 target Monday. Without any refueling along the way, 1323.50 was tested Tuesday, and  held as resistance through the close. Its test Wednesday held through the close, too.

But it wasn’t rejected, not intraday, as Wednesday’s session essentially ranged around it. The 1323.50 area can still launch a downleg, either by breaking lower immediately at Thursday’s open, or by quickly rejecting a probe of fresh highs.

But exiting Thursday morning’s bias environment after 11:30 above 1323.50, and without yet having launched a downleg, would be much likelier instead to extend the upleg.

What’s Next… (Outlook and opportunities)
Whether by gapping down or immediately slicing lower, breaking under 1317.00 through Wednesday’s open would compensate for the delay of not yet having rejected the test of 1323.50 resistance. Alternatively, a fresh high can be rejected through the morning’s bias environment exit (either from 1328.00, or from above Wednesday’s 1329.75 pre-open high).

A downleg’s minimum objective would be 1330.00 1300.00, which could extend down further, or launch another rally leg. Extending higher would next target 1339.00-1340.00, but probably also new highs in the 1370‘s.[/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.