Trading Plan for 6/12

THE FRONT-MONTH ROLLS TO SEP (U) AT TODAY’S OPEN

[pay]Pattern notes.
The Globex open dipped 1 point under the ESm 1335’00 target, and then firmed several points. A narrow range through most of the night started trending up until probing the prior target of 1342’25 by 1 point. This put S&Ps back above yesterday morning’s 1340’00 low, which was also a target (intraday) and which is now being tested as support.

Yesterday afternoon’s eventual break lower was hard fought through several false starts that barely managed to meet the target before the close. And after all of that, there was only a small momentary lower low before buyers tried taking control again. This degree of optimism is amazing, and it suggests that the bottom has not been seen. Either the bounce underway will reverse back down to test yesterday’s low, or else a new downleg of greater proportion will begin.

Indicators and Internals.
Optimism isn’t limited to price action. I am also amazed at the narrow ratio between internal spreads. The spreads themselves weren’t narrow – 4.3 times more NYSE declining issues than advancing, on 5.6 times more down volume than up volume. Thursday’s session is obligated to reward Wednesday’s buyers for their relative productivity, but that was relatively small compared to the norm for sizable declines nearing an end. In this case, any relief is likely to be retraced.

Thursday’s opening setup.
The chance for a morning rally attempt largely depends upon whether the market can maintain its overnight recovery of yesterday morning’s ESm 1340’00 (ESu 1342’50) lows. Preserving the recovery to allow a gap up would be most likely to actually extend up to 1349’00-1350’00 (ESu 1351’50-1352’50). Otherwise, it will be difficult to resume the decline today, since last night’s initial narrow ranging built up significant support around 1338’00 (ESu 1340’50). Sellers might need to time to chip away at it, unless they can spike through it how yesterday morning’s sellers managed to cut through Tuesday morning’s Globex lows. The calendar is loaded with reports this morning and tomorrow.[/pay]