Trading Plan for 7/29

[pay]Pattern notes.
Monday’s drop did some new damage to the charts, but not much more than what was already there. Last week’s high had already retraced entirely back to its origin and back under prior highs, all but requiring the next trending attempt to produce new lows.

The break’s shear size – 14-15 points under prior lows and 26 points off session highs – did test ESu 1235’75. This was the intraday high of the decline’s July 15 low, so the round-trip is almost a new sell signal. It is also natural support, and a bounce has potential up to 1240’00 or 1246’00 without buyers beginning to gain traction.

A bounce isn’t required, but in its absence the decline would likely resume by spiking or gapping down sharply. The next major target is 1218’00, then 1194’00.

Indicators and Internals.
1-minute MACD & RSI diverged positively at Monday’s last-minute low. The last downleg’s sponsorship ended there. 3-min RSI was oversold at the session low minutes earlier. This makes the next trending attempt likely to be either a temporary bounce, or as described above, a gap or spike down with new sponsorship.

Monday’s internals suggest a bounce, whether immediately or from lower lows, since 4 times more NYSE down volume than up volume produced only 2-1/2 times more declining issues than advancers. This tends to obligate the following session to reward buyers for their relative productivity.

Tuesday’s opening setup.
Retail sales data will be announced before Tuesday’s open, then Consumer Confidence 30 minutes into the session. An early bounce to 1241’00 might provide the ideal short-entry opportunity for a new downleg next targeting 1223’50. Bouncing from an early drop would still have potential to 1241’00, and still reverse back down to new lows.[/pay]