Trading Plan for 7/28

If the “accident waiting to happen” is happening… then Friday’s drop should not delay extending down Monday — aggressively. There is no unfinished business above, but Fridays don’t tend to start new trends, any more so than they end them.

Pattern points… (Setups and technicals)[pay]
Immediately trending from the 1982.00-1984.75 area wasn’t going to be credible. Thursday’s close was testing that range’s lower-end, and not yet breaking under it. Friday’s open overcame it by gapping beyond prior lows. That doesn’t require extending down, but it doesn’t require being recovered.

Reversing a consolidation range from one end to the other wasn’t likely. Friday’s prior three session had overlapped each other. Gapping down to Tuesday’s lower-end of the three-session range leap-frogged over the range’s 61.8% internal retracement that would otherwise try to prevent a reversal.

Despite developing entirely above July 3’s holiday high, Thursday’s session was unable to close above Wednesday’s highs. After two prior sessions had probed fresh highs while still overlapping July 3’s range, Thursday’s “ineffectual optimism” earned the warning of being an accident waiting to happen.

The question is whether the accident is actually happening.

Fridays aren’t very reliable for signals since their participation is thinner. The morning’s drop might have been recovered if not for Friday factors, which is unusual behavior due to the impending weekend’s illiquidity. That cuts both ways, and the factors could be attributed to delaying fresh lows. Regardless, the delayed outcome should be compensated Monday by gapping up or down substantially.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Friday’s Market Wrap (recording linked in the blog’s sidebar) depicts a possible Ascending Triangle that has formed, and which may be failing. An intraday “uptrending pivotal trendline” break that should still test 1968.00 could resume Friday’s decline to continue developing the failed Ascending Triangle. Its minimum objective would be 1963.25, probably to 1960.25. Failing to recover from either would open the door to 1931.75. Any delay in extending down would be likely to retest the 1982.00-1984.75 range before a durable decline would be credible.[/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.