Trading Plan for 7/29

Breaking News: The House vote has been delayed. Okay. The announcement came two minutes prior to the maintenance close. S&Ps spiked down 5 points to 1292.25. The knee-jerk reaction may have been exacerbated by the impending illiquidity. And it may be short-lived, since the vote is now rescheduled for later in the evening.[pay]

Pattern points… (Setups and technicals)
A corrective bounce targeted the 1310.00 area. It was probed to nearly 1313.00. The afternoon’s decline targeted 1301.00. The 1295.75 pre-open low’s retest was already likely.

The new bounce target was satisfied, and the decline’s new targets were satisfied. No unfinished business above. No unfinished business below.

No unfinished business below, except that Thursday’s close was a new low. Sellers gained traction for their efforts. Some sort of lower low is required – whether a momentary dip, or a protracted decline. So, no interim bounce will gain traction.

A momentary dip could follow a gap up Friday. Recovering the dip to close back above the opening gap’s high would form a bullish Pivot Reversal. Alternatively, several sessions could probe lower lows, without extending down, to form a bottom. Otherwise, a protracted decline is likely.

Meanwhile, a heads-up: The NDX-Dow-S&P relationship have formed the basis of a bottom signal (S&Ps outperforming the Dow and underperforming NDX). No signal would be triggered prior to Friday’s close, at the earliest. I’ll discuss it in the chartroom throughout the day, and in greater detail in the next Trading Plan if triggered.

What’s Next… (Outlook and opportunities)
A relief rally would be likely in reaction to a credible debt deal. Gapping up above Thursday’s ~1313.00 high could extend higher into the weekend. Any shallower gap up would be likely to fail, as would any rally after gapping down.[/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.