Trading Plan for 7/27

Tuesday was another session under pressure… the third consecutive such session. Spending the entire session in negative territory, probing the prior session’s low. That’s a lot of pessimism. Not gaining traction would make it “ineffectual pessimism.” [pay]

Pattern points… (Setups and technicals)
Tuesday differed slightly in one way, by not gapping down like Friday and Monday. Tuesday differed slightly in another way, only the cash session close recovered back above the prior day’s low. Futures extended down.

Regardless, sellers are not gaining traction for their effort. That’s not a buy signal, the situation can persist indefinitely. Regardless, it tends to resolve violently – whether by surging to compensate for the delay, or by plunging if the delay takes too long.

A lot of selling pressure was expended Tuesday while trading almost entirely in the lower-half of Monday’s range. All that selling pressure, yet still closing above Monday’s low, and above Tuesday morning’s low. RSIs diverged positively into the futures close, but that doesn’t prohibit another probe to fresh lows, even if only a detour.

What’s Next… (Outlook and opportunities)
Wednesday’s open has the same template as Tuesday. It is likely to gap up, and gapping up would be likely to trend intraday. Not gapping open would be likely to trade throughout the morning within Tuesday’s range. But unlike Tuesday’s template, an intraday probe of fresh lows down to 1319.00-1321.00 could trap shorts to launch a bigger upleg. [/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.