Trading Plan for 7/31

If Tuesday morning’s open had extended the overnight rally… then new highs could have printed before noon. That’s going to be difficult with FOMC hanging over the market’s head. But not extending down on the news could find the afternoon trending higher.

Pattern points… (Setups and technicals)[pay]
Tuesday morning’s optimism wasn’t crushed immediately. And that was the problem. “Ineffectual optimism” only delayed the predictable downside consequence of not having exploited so many bullish setups. It also made that downside consequence more aggressive.

Price only drifted down through the morning in several distinct waves. Each bounce failed, but only to a slightly lower low before bouncing again. The afternoon’s 7-point slide delivered the aggressive downside consequence.

Sliding did fulfill its 1677.00 objective. And it stopped short of any level whose break would have sent momentum over the edge. Then its reaction up tested the morning and noon’s last three slightly lower lows up to 1682.50, 1683.00 and 1684.00.

That last bit could be key to a rally. Tuesday morning’s waves created substantial resistance. There are two ways to extend through its 1687.00 upper-end. Either spend time and expend buying pressure sawing through, or else gap up. Already having tested the range’s lower-end is one less thing for buyers to do Wednesday before extending higher.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Otherwise, there is no unfinished business below, but potential for retesting Tuesday’s 1677.00 low. And probing it by 4-5 points to test 1672.50 would be too deep for only a corrective dip, and more likely to launch a new downleg.  [/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.