Trading Plan for 7/6

[pay]About that close (How the prior session ended)
Friday’s last-hour surge was triggered at 1017.00, trended up through 3:10-3:20, and extended to 1026.00. That’s where buyers lost traction before. Having expended so much buying energy so quickly made the bounce vulnerable to falling again.

The surge’s last productive pullback limit at 1023.50 broke lower to signal momentum reversing down. Such little time remaining made any reversal likely to be severe. In fact, the cash session close pierced 1017.00, on the way to 1013.25. Only one bounce of more than 6 ticks between them.

Pattern points (And technical influences)
Friday’s session was an inside day, except for the pre-open spike up, which doesn’t require a retest. The open’s gap up to 1026.00 was under Thursday’s high, so it didn’t require a retest.

The open’s gap up didn’t require a retest, but it was retested anyway – after the post open dip, and again at the afternoon’s high. Although it pushed both tests back down, the tests have chipped away at 1026.00‘s resistance. One more test would be all but assured to break higher. But since the bigger picture remains bearish, bullish setups should fail, if attempted at all.

So the break higher described above is unlikely. That said, Thursday’s low tested a big target at 1007.00. A break higher would trigger an Ascending Triangle pattern targeting 1040.00 or almost 1058.00-1059.00. In any case, the resolution would still be down.

Meanwhile, the daily chart is forming a “Rubber Band.” The setup is analogous to stretching a rubber band so far that it should either snap back, or break sharply in the direction it is being stretched. It forms when all but 1-2 of the prior 10-11 sessions close in the same direction. The holiday weekend might absorb enough energy to neutralize the stretch. Beware if not, as the next lower target is 980.00.

Bottom line (My underlying premise)
Rubber Band is vulnerable to a very steep move. Either the existing decline extends down at an accelerated pace, or it reverses sharply. Any time from Sunday night through Wednesday’s open would fit the template. If the holiday weekend has absorbed the Rubber Band’s energy,then price should range sideways at least through Tuesday’s open… Check back after Sunday night’s Globex open for comments on any interesting price action.  [/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.