Trading Plan for 7/31

If Wednesday’s FOMC statement didn’t kill the rally… then why should Friday’s Employment Report be a concern? Discounting this sentiment Thursday wouldn’t be surprising — regardless of the actual reaction.

Pattern points… (Setups and technicals)[pay]
Wednesday’s opening gap up was similar to Monday’s, in creating extra room for selling pressure before it could damage the chart — at least, to limit the damage — before sellers were expended. The two open’s weren’t consecutive, so they had the freedom to resolve similarly.

And they did. Monday’s tactic did recover much more ground than Wednesday. But Wednesday recovered into positive territory.

Buyers didn’t gain traction either day, and neither did sellers. So, avoiding a fresh low all but requires gapping up Thursday. Gapping up enough — above the afternoon bias environment’s 1971.50 high — would form a session-long rally setup.

Any plausible rally effort should be rewarded by retesting last week’s highs — Thursday would be entirely possible. Meanwhile, breaking under 1958.00 through any relevant timing window would be a final straw, the last line of defense before a deeper detour to 1931.75 gets underway in earnest.

[/pay]What’s Next… (Outlook and opportunities)[pay]
One more day before the monthly Employment Situation report. More tapering on Wednesday didn’t kill the market, so Friday’s numbers probably won’t be bearish. At least, not from current levels. Greeting the report after printing fresh highs Thursday could be another story.[/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.