Trading Plan for 7/25
[pay]Pattern notes.
The corrective bounce off last week’s ESu 1200’75 low targeted the 1260’00 area. Repeated probes of the target area failed from anywhere between 1263’00-1269’00. A drop back to last week’s low appeared to be underway when Tuesday’s open gapped down, but a rally up to 1291’00 appeared instead.
That rally was pretty convincing. It convinced me that any real threat to extending higher would need to be obvious before Thursday’s open. The real threat appeared at Thursday’s open, and it retraced all of the gain from Tuesday’s gap-down open. Now the corrective bounce’s 30-point extension above the 1260’00 area has served to trap more longs to help fuel the decline’s resumption.
At least, that would be the effect upon closing under Thursday’s 1251’00 low. This is being tested now 4 hours before Friday’s open, the overnight session’s second dip after two bounces that each tested 1256’00. One more bounce should reach 1261’00 before resuming the drop, or else close above 1261’00 to prove Thursday’s drop was only a detour on the way to 1303’00.
Indicators and Internals.
Thursday’s internal spreads were wide at about four times more NYSE issues declining than advancing, on about seven times more down volume than up. The lopsided ratios still obligate the market to reward Thursday’s sellers for their relative productivity with some sort of bounce, however briefly. Overbought 3-minute RSI accompanied the most recent bounce overnight to 1256’00 so its retest is likely, and likely to provide that reward.
Friday’s opening setup.
Currently a break above 1252’00 is halfway to its modest 1254’25 target, where another 2 ticks higher would put 1261’00 into play. Call it a last hurrah that, if reached, either triggers a stampede for the exits going into the weekend, or else extends higher with 1278’00 in mind.
The decline might simply restart at Friday’s cash session open, timing similar to Thursday’s start. This scenario would start by gapping down or spiking under 1248’25 and failing to recover positive territory through 10:15.
The day is not wanting for econ reports to keep alive volatility, starting with Durable Goods at 8:30, then two more high-profile reports at 10:00 – Consumer Sentiment and New Home Sales.[/pay]