Trading Plan for 7/7

[pay]Pattern notes.
Thursday’s intraday range of 22 points doesn’t begin to describe the day’s price action. Probably by a factor of three, the range understates the actual mileage covered during two visits to session highs and an interim drop to new lows. And despite the volatility, Thursday’s close was essentially unchanged.

The numbers also don’t recognize that S&Ps printed new lows for the year, or that the retest of session highs was preceded by a test of the ESu 1257’00 target. Each development satisfies its own contingency of selling pressure. I suspect that won’t be enough to form a durable bottom, but it requires either beginning the process, or else extending the decline accelerated pace.

Indicators and Internals.
Thursday’s NYSE down volume was only 35% greater than up volume, yet it produced 90% more declining issues than advancing. The shortened session and flat close mitigate the internal distribution somewhat. But shortened session or not, sellers seem pretty productive compared to only 45 minutes spent in negative territory. Not surprising since oversold RSI at Thursday morning’s low requires its eventual retest.

Monday’s opening setup.

Friday’s Globex session fell back to 1257’00 (and closed there), perhaps giving a preview of Monday’s price action. A retest of the low and its recovery back into positive territory – preferably from new lows at 1244’00-1247’00 – would make a more convincing bottom than would an immediate rally at Monday’s open. Unfortunately, the new lows would look a lot like the beginning of a steeper, deeper decline, which continues to be a very real risk. I’ll be in the charting room Sunday night with observations, and in the blog with updated comments.[/pay]