Trading Plan for 7/29

If Friday’s recovery had stopped a few points short… then it would have left pent-up buying interest outstanding to help resume the rally on Monday. Closing above prior highs can create new buying interest, but Friday didn’t challenge a prior high until its last minutes. At least sellers gained no traction.

Pattern points… (Setups and technicals)[pay]
The end of the week began with a probe under 1675.25 prior lows. The origin of that probe indicated that it would not extend down after fulfilling its 1672.50 target, and it didn’t. That didn’t change whether there was no bullish reason to probe prior lows, which there was not.

The week ended with that probe’s recovery extending relentlessly higher into the close. The gaps back to Thursday’s 1684.00/1685.25 closes were not revisited until after the 3:10-3:20 timing window. Thursday’s 1686.50 high was barely touched at Friday’s close, and then exceeded into the futures close. But positive territory was not recovered during a relevant timing window, especially for a Friday afternoon.

A lot of extra buying pressure was expended without necessarily gaining traction for the effort. But no prior high’s touch was rejected, so there is no requirement to reverse down. And closing above the morning and noon hour highs allows Friday’s recovery to extend higher Monday without first gapping up, or by recovering from initial weakness.

Extending down immediately Monday could resume the drop from Thursday’s close by retracing the origin of the last 60-90 minutes rally from 1679.25. Until that is reversed, any pullback could still recover to resume the rally.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Please join us this weekend for the Saturday Strategy Session at 9:30am ET. Its link can be found in the blog’s sidebar.[/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.