Trading Plan for 7/28
[pay]Pattern notes.
If Friday’s open didn’t gap down, then a bounce testing ESu 1261′00 was likely. And if the open tested 1261′00, then sellers were likely to visibly retake control. And if sellers didn’t visibly retake control, then a trading range 2-2 points either way around 1261′00 was likely into the afternoon, until sellers visible took control during the last 90 minutes.
The early bounce held its target, the balance of the morning ranged around it, and then sellers took control. Perfect, except that sellers showed their hands much too early, well before the last 90 minutes. The timing was too soon, and too pessimistic. It produced only a brief new session low that was easily absorbed. Not that buyers exploited their own strength – the balance of the session only ranged 2-3 points either way of the afternoon’s 1255′50 bias-down signal.
Did sellers trap buyers by letting them control an irrelevant timing window when their selling would be irrelevant? It’s possible, although it would be odd for the session to end nearly flat, instead of buyers exploiting the inappropriately timed selling with a rally to new session highs.
In the end, buyers did not retake control and their next opportunity is a gap or spike up at Monday’s open. This show of force is required because their forcefulness Friday was ineffectually optimistic. Buyers never exploited their recovering from new lows overnight, gapping up at the open, and trading almost exclusively in positive territory. Absent a gap up Monday, a gap down is more likely.
Indicators and Internals.
Friday’s 3-minute RSI never touched overbought or oversold during the cash session, such was the lack of conviction. Overnight trending did, but it didn’t leave any unfinished business. Meanwhile internal spreads reflected accumulation, but not by strong hands. More NYSE down volume than up volume produced fewer declining issues than advancers. Had the session closed negative, then this would have been very positive. Instead its just more evidence of sellers giving buyers more rope to hang themselves.
Monday’s opening setup.
No econ reports are due, although the calendar gets heavy as the week goes on. If Friday’s brief gap up setup were repeated at Monday’s open, then any delay this time in reversing down would simply be bullish. Otherwise, sellers should be in control obviously and dramatically at or near the open, if not already Sunday night. [/pay]