Trading Plan for 7/22
[pay]Pattern notes.
The session following expiration tends to be a different version. That seemed very unlikely when S&Ps were gapping up at Monday’s open. But well before close it became obvious that the same frustratingly narrow ranging would price action. Except for failing to maintain a probe of new highs and then chipping away at support, the session did very little.
Then came disappointing earnings or guidance after the close from AAPL, AXP and TXN. S&Ps gapped down 3 points and plummeted another 9 points down to ESu 1249’50. This isn’t the lowest since Thursday fulfilled the corrective bounce target above 1260’00 – that night’s range fell to 1240’00. But this is the lowest since Friday’s retest of the target and Monday’s higher high. If this rejection isn’t itself rejected through Tuesday’s open, then the trend will have reversed down.
I would still like to see last week’s 1200’75 low retested down to 1194’00. It’s too soon to predict whether a bottom will form there, but that would be the best chance buyers have had in the past several dozen points. If they don’t gain traction there, then the next leg down is dramatic.
Indicators and Internals.
Monday’s NYSE up volume was only 10% greater than down volume, but advancing issues numbered about 70% more. Although this would normally obligate Tuesday to reward Monday’s buyers for their relative productivity, that becomes moot when gapping out of the range. A lot depends upon whether the post-close losses are recovered. The 3-min RSI got oversold quickly and has stayed oversold, so a sustainable low isn’t yet likely here at 1249’00.
Tuesday’s opening setup.
Under 1248’00 would confirm the break’s momentum remains intact, and next targeting 1235’00. More earnings are due before Tuesday’s open, so more opportunities to change perceptions. AAPL, AXP and TXN earnings weren’t good, and each has its own ripple effects that justifiably magnify the bad news. Other earnings reports were comparatively better, so a recovery can’t be discounted. [/pay]