Trading Plan for 7/9

If Monday’s opening gain were the product of strong hands… then Monday’s close should have been higher. But it wasn’t, despite all of the intraday swings. Often, the only path higher or lower requires gapping open sharply in that direction.

Pattern points… (Setups and technicals)[pay]
Sunday night’s rally and Monday’s opening surge share one important characteristic, in that each held their tests of 1637.50. Monday’s opening surge included a test of 1639.00, which is the upper-end to 1637.50-1639.00 — the rally’s next higher objective.

Holding an intraday test of 1637.50-1639.00 satisfies buying pressure. Two or three tests suggest its resistance is being chipped away. So it is interesting that 1637.50-1639.00 was tested pre-open, post-open, and then also post-close in reaction to the Alcoa (AA) earnings. Only the intraday test qualifies as a test, so chipping away at its resistance would require extending higher Tuesday.

Extending higher would next target 1641.50, and then potentially the 1648.00 area. Reversing back down would be attracted to the gap outstanding at Friday’s 1625.00-1627.00 close(s).

[/pay]What’s Next… (Outlook and opportunities)[pay]
Extending higher is not at all assured, despite not rejecting the overnight rally. That’s because Monday’s 1634.25 close did not improve from the open’s 1634.00 gap up print. Buyers gained no traction for their efforts. Sellers also gained no traction, so reversing down immediately would require gapping down. Otherwise, reversing down would require probing a fresh high first[/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.