Trading Plan for 6/10
[pay]About that close (How the prior session ended)
Wednesday’s pullback into 1071.50 had long since passed the point of refueling buyers to retest the session’s 1077.75 high. The A bounce back up to 1071.50 at 2:30 neutralized its attraction that might have prevented trending. The last hour was free to retest the 1052.25 overnight low, ultimately probing it by 1 point. Bounces before and after the cash session close held tests of 1056.25 as resistance.
Pattern points (And technical influences)
Holding 1056.25 as resistance did not trigger a sell signal. But it was bearish. Recovering 1056.25 after probing its support would have robbed sellers of their traction. Then the last downleg’s purpose would have been to refuel buyers. That would have been a lot of refueling, considering the downleg originated 20 points higher.
Resuming the drop without delay would be dramatic. The principle is similar to Tuesday’s ill-formed Pivot Reversal. Failing to produce the final element makes the setup as bearish as it could have been bullish. Similarly, Wednesday’s two failed last-minute bounces prevented buyers from triggering a very bullish setup. And that is very bearish.
Sellers might allow a bounce, first. They gained traction, but expended a lot of energy. A bounce’s objective would be 1061.25, potentially 1068.00-1069.00. But no bounce is required. And buyers don’t gain traction without closing above 1068.00-1069.00.
Bottom line (My underlying premise)
Keep in mind the characteristics of bear market bounces. They can be very seductive, because their steep and substantial gains resemble the meatier moves of a bull market rally. But they start from unsustainable lows – like Tuesday’s failure to probe prior lows. And they’re vulnerable to reversing down without warning.
So far, the broader sentiment is viewing current lows as bottoming. The lagging recovery is naturally losing its supporters. Look out below if Wednesday’s reversal has tipped the scales of disbelief. S&Ps down 60 points in two days didn’t elicit talk of a new downleg. Two days of failing to rally out of the lows might.
The front-month rolls from Jun to Sep at Thursday’s open. The difference is 4 points less, so subtract 4 points from the Jun prices quoted above for the equivalent Sep price. [/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.