Trading Plan for 6/11

[pay]About that close (How the prior session ended)
Thursday morning’s 1079.00 high was finally retested just before the session’s last hour. The 3:10-3:20 window trended up to fresh highs at 1082.25, multi-session highs that should have extended the breakout higher without delay. It didn’t. So, the last 5-7 minutes should have surged to compensate for the delay. It did. And then it didn’t

Pattern points (And technical influences)
A 5-point surge into the cash session close reached 1083.50. Then futures dropped back down to the surge’s 1078.25 origin. And the surge’s origin happens to be under the morning’s 1079.00 high. Despite the late surge compensating for delaying fresh highs, the surge was retraced entirely.

Meanwhile, the entire afternoon rallied back from the 1067.50 noon hour lows. It shared the same fate as the late surge described above – although the cash session closed above prior highs, futures closed back under the morning’s high. Despite probing the morning’s high, the morning’s high held as resistance on a closing basis.

Finally, Thursday’s high held a test of last Friday’s post-open high. That was the first reaction to its 19-point gap down. It’s a relevant level. Despite piercing its resistance – albeit only slightly – the resistance held on a closing basis.

These are three signs that buyers are not gaining traction. The session’s weak volume (the weakest in five sessions) undermines the rally’s credibility, too. Nevertheless, the pattern of gapping up and closing higher can be duplicated for another 2-3 consecutive sessions. Gapping up Friday would be consistent with this pattern. Regardless of whether this pattern is finished extending, it always ends poorly.

Bottom line (My underlying premise)
Sellers might be attracted by the weekend’s impending illiquidity, combined with the recent bounce off the lows. Initial weakness Friday that breaks under 1076.25 would reverse momentum down from Thursday’s rally. And reversing Thursday’s rally would all but begin a new downleg targeting new lows. Otherwise, the next higher target is 1087.25, whose recovery would all but ensure probing last week’s 1103.00 high.[/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.