Trading Plan for 7/29
[pay]Pattern notes.
Hurry up, and stop. It’s now Day #13 since July 13’s first up-day in a sequence that has only two modestly negative closes. The Rubber Band setup says S&Ps have been stretched to their breaking point, or to their breaking back point. The market is at its most vulnerable to reacting to the stretch either like a slingshot, or by the stretch’s force snapping the rubber band’s resistance.
Yet, price has only ranged 968’50-976’50 since Thursday afternoon. Probes of either end of the range haven’t gained traction to slingshot back down, or to snap up. The last two sessions were “ineffectual pessimism” – gapping down and ranging exclusively in negative territory, but not letting sellers gain traction. Buyers are tired, but sellers aren’t taking the bait.
The Rubber Band effect is all but dead. It still has a chance if tomorrow’s open gaps under the range’s lower-end and extends down sharply. An opening or pre-opening surge that is quickly or immediately overwhelmed by more substantial selling would also be consistent with the setup resolving down. An immediate surge that doesn’t look back would be credible for resolving the setup upward.
Otherwise, sellers will have failed to exploit buyers’ hesitation. This would probably make the market suck in buyers to fill the void, perhaps to retest the week’s 984’00 “new Globex trend extreme.” But there is no predictability for whether those buyers extend higher very long before reversing back into the range.
Indicators and Internals.
Simultaneously oversold RSIs during the formation of Tuesday’s 966’00 low make the level’s eventual retest likely. The amount of selling pressure required to produce the technical reading is usually preceded by bottom-fishers, not durable buyers. The 12-point reaction went on to new afternoon highs where RSIs became simultaneously overbought, which was retested already to within almost 1 point.
Wednesday’s opportunities.
Beige Book data in the afternoon can influence price action initially. It can also paralyze price action beforehand. But it’s not generally capable of stalling the open’s volatility from settling. So, the morning’s bias is likely to persist through the noon hour. An early or overnight probe of higher highs that turns negative, or a dip that recovers, should produce trending. If a third consecutive day of “ineffectual” anything starts shaping up, I’ll expect an afternoon false break and reversal.[/pay]