Trading Plan for 6/10

Thursday’s bounce started reversing down… but stopped short of triggering a bigger drop underway. That doesn’t make the bounce any more durable, but it might try to extend higher before resuming the decline.[pay]

Pattern points… (Setups and technicals)
Entering the last hour at fresh session highs usually marginalizes sellers for the balance of the day. It usually extends higher through the bottom of the hour. Thursday’s fresh high at 3:00 – probing the afternoon’s 1287.75 bias-up signal by 3 ticks – did neither.

That was appropriate since the afternoon’s narrow range was likely to resolve down. It was the plateau following a surge out of a Rising Wedge that had appeared in the morning’s uptrend. The next leg should be down, and it should retrace all of Thursday morning’s rally from 1273.50.

Wednesday’s 1269.75 post-close low should be retested, too. Rallying away from unfinished business below suggests that sellers are being refueled. Meanwhile, the morning’s Rising Wedge is a Running Correction that reflects excessive optimism. It is inappropriate on the first leg off of a new low.

Thursday’s late drop retraced 38.2% of the rally from Wednesday’s 1269.75 post-close low. Fresh highs before dipping any further would further confirm the bounce’s sponsorship is weak hands. Regardless, only a weaker open may prevent extending the bounce Friday.

What’s Next… (Outlook and opportunities)
Closing any lower under 1281.00 would have suggested holding short through the close. This was avoided, suggesting another attempt to extend the bounce. A bounce has room to attack 1287.00 without buyers regaining traction. But just opening under 1281.00 would trigger weakness. Being a Friday, any initial trending is likely to extend through the noon hour. [/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.