Trading Plan for 7/25

If rejecting an opening surge back under its low is a reversal signal… then rejecting two opening surges back under their lows should lead to a trend change. Wednesday’s decline was on the cusp of triggering that signal. 

Pattern points… (Setups and technicals)[pay]
Wednesday’s closing action trended up to 1684.00. The last 3 points above 1681.00 all printed after the cash session close. The afternoon bias environment had been ranging around 1679.25, whose break would have signaled the daily trend reversing down. Trending up earlier would have rejected the trend change attempt.

Trending up earlier made another difference, too. The daily trend reversal attempt would have been rejected by the cash session closing back above 1683.50. The late sponsorship did not qualify, so Thursday’s open could still send a delayed signal that the daily trend is reversing down.

Two consecutive sessions probed fresh highs, and the third session closed back under both sessions’ lows. Sellers are showing their hand. So, if that’s not the start of a more sizable multi-session decline, then it should be the start of a new rally leg. Sellers get a benefit of the doubt, and the burden of proof is on buyers.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Since Wednesday’s closing action trended up, and the afternoon’s 1677.50 low was printed during its bias environment, gapping down to or through 1677.50 would trigger a “session-long decline” setup. Holding a test of 1677.50 would trap shorts, and start to form a bottom. But extending higher without even testing 1677.50 would have room up to 1689.50 before even suggesting a bigger rally underway.[/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.