Trading Plan for 7/22
[pay]About that close (How the prior session ended)
Tuesday afternoon’s no-bias trending had required a retest of its 1066.50 bias-up signal. Events (the Statue of Liberty evacuation and Bernanke’s Senate testimony) conspired to form a more violent retracement than normal. The no-bias trending’s weak-handed sponsorship played its part. Wednesday’s last hour ranged around 1065.00, where Tuesday’s no-bias trending had actually begun.
Pattern points (And technical influences)
The last hour’s 3:10-3:20 timing window started out bouncing, and ended by rejecting a probe above the 1065.00 prior low. That action didn’t need to end the bounce, but it did. It also forecast a coming probe under Wednesday’s 1061.00 low. Bouncing first would be no safer.
This ranging around the 1065.00 prior low also neutralized an oversold 3-minute RSI without becoming overbought. A lot of selling pressure was absorbed without much of a bounce. So there’s not much room to absorb new selling. A retest of Wednesday’s 1061.00 low is likely to be by a wide margin.
That wide margin could include a retest of Tuesday’s 1053.25 opening gap. RSIs had diverged positively into its pre-open lows, so they don’t require a retest. Just gapping down through 1055.00 could break free from any attraction to unfinished business above. Any milder initial selling pressure would still have a chance to try bouncing again intraday.
That unfinished business above is essentially Wednesday afternoon’s 1075.00 bias-down signal. Similar to Tuesday afternoon’s no-bias rally, Wednesday’s decline requires a retracement for having developed during a no-bias environment. But only its bias-down signal requires a retest, and not its 1081.50 origin.
Bottom line (My underlying premise)
I don’t think anything Bernanke said was earth-shattering, surprising, or unusual. He only confirmed that the Fed’s thinking hasn’t changed. Perhaps the Statue of Liberty evacuation exacerbated the effect. Perhaps Tuesday’s rally was in anticipation of the earnings season’s rare bright spot (AAPL). Unless Thursday opens down hard and stays down, one more bounce attempt is likely.[/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.