Trading Plan for 7/27

[pay]About that close (How the prior session ended)
Buyers had gotten a benefit of any doubt throughout Monday’s session. Despite ranging narrowly around 1108.50 for three hours, a dip could touch 1104.25 without sellers gaining traction. In fact, a dip touched 1104.50 as the afternoon’s bias environment was lapsing. RSIs diverged positively, and the last hour rallied up to 1111.75.

Pattern points (And technical influences)
Monday’s last-hour recovery was still stuck at 1108.50 until the cash session’s last 15 minutes. That’s too late to credit the higher high with gaining traction. In fact, futures dipped back to 1108.50 into the Globex open.

There is no unfinished business above, but Tuesday’s session can still probe fresh highs intraday. Overnight or initial weakness has room to test 1104.25 and still recover to test Monday afternoon’s 1111.75 high – perhaps even the rally’s next potential objective at 1118.00.

But having trended up into the close, from an afternoon low that printed before the last hour, gapping down under 1111.75 1104.50 would signal a session long decline. It would also leave outstanding a gap back to Monday’s close, inhibiting a durable downleg from beginning for the unfinished business it would leave outstanding above.

Bottom line (My underlying premise)
Like the rally’s 1093.00 target tested two weeks ago, holding its test through the close reflects the rally’s weakening sponsorship. Like Thursday’s opening surge that then ranged sideways through the day, the rally is overly optimistic. Sellers are being patient, and the reward for that patience should be another steep, deep downleg.[/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.