Trading Plan for 7/28

[pay]About that close (How the prior session ended)
Tuesday’s close made it official. By ending the day ranging narrowly under Monday’s high, Tuesday morning’s buying effort gained no traction. Tuesday’s 3:10-3:20 timing window ignored an opportunity to probe fresh afternoon highs, whose recovery would have breathed new life into the rally. At least sellers never gained traction intraday.

Pattern points (And technical influences)
Closing under the prior day’s high in an uptrend is a warning. Closing under the prior day’s high despite testing a target is a sign. And Tuesday’s 1118.00 target wasn’t a conventional target. It was met by gapping up at the open, without the prior session putting it into play.

Like the two-week old prior high at the 1093.00 target, buyers are gaining ground, but not traction. It is an accident waiting to happen. Sellers have yet to gain traction themselves, which keeps alive the potential for intraday strength.

In fact, sellers had all of Tuesday’s noon hour and afternoon to gain traction, but only ranged sideways to form an Ascending Triangle. The pattern could break down without delay, but probably would have already if that were the market’s intent. Meanwhile, Tuesday’s 1116.50 opening gap wants to be tested, as does the 1118.75 pre-open high.

Gapping down under 1103.75 would break free from any remaining attraction back to Tuesday’s highs, at least in the near-term. But a morning test of Tuesday’s high that reverses down into the afternoon would seal a very substantial top.

Bottom line (My underlying premise)
More sideways ranging centered around 1108.50-1118.00 without extending higher would only increase the distribution. But this pattern doesn’t need much distribution before ending this retest of the two-week old high. Unfinished business above, or not, I would be suspicious of any recovery attempt if a relevant timing window contains a break to fresh lows.[/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.