Trading Plan for 6/15

[pay]Pattern notes.
Friday’s gap down extended lower only long enough to hold a test of pre-open lows within 1 tick of the 931’00 bias-down target. Thursday’s high stopped similarly short of its 953’00 bias-up target. Anyway, Thursday’s cash session close at 940’00 wasn’t even touched until the last 90 minutes, by a single surge that quickly peaked at 942’50. It was later probed, and not rejected, but neither did it give way as resistance.

Despite holding its gains for awhile, the mid-afternoon’s surge into positive territory lasted too briefly to be relevant. And despite not yet retracing the late recovery, it originated too late to be relevant either. The first surge’s rejection fulfilled last Friday’s Gotcha! setup that identifies big money using rallies to distribute. This Friday wasn’t a great example since most of the session was spent in negative territory. But the premise remains intact, since buyers didn’t gain traction.

There is no unfinished business above. Friday’s highs held the prior week’s Mon-Tue highs at 945’00-947’00 (green dashed line in the upper chart). The rejection of the week’s interim high failed to recover above the prior week’s highs. The week’s new high close ended back under two weeks worth of higher intraday highs.

Two weeks-worth of uptrending support, with its three tests (circled in red) were followed by a fourth test Friday (circled green). It didn’t bother probing the trendline before bouncing optimistically off of it. Maintaining a gap up above 945’00 Monday would start to signal the optimism was growing.

There is also no support below. Friday’s late dip tested the intraday “lower prior highs” (highlighted green in the lower chart), neutralizing its support. The dip also probed uptrending support (circled red), neutralizing the support of every prior low that created the trendline – breaking it would serve as proxy to breaking its lowest point at 931’25, whose eventual break would be just a formality.

The combination of no unfinished business above and no support below makes Monday’s open vulnerable to gapping down under all of Friday’s range. The red uptrending support in the upper-chart is similar to the lower chart’s green uptrending support, but the red trendline’s lowest price is under 918’00. Monday could produce a sizable decline before the opening tick, unless the open gaps up above Friday’s highs.

Indicators and Internals.
The lower chart depicts Friday’s 3-minute RSI, which diverged negatively into the afternoon’s two highs. The 1-minute RSI also diverged negatively. The setup wasn’t too late to be relevant. But it can be rendered moot only by gapping up Monday above a prior relative high, which in this case is 945’00.

Monday’s opportunities.
Of three econ reports, the highest-profile is at the noon hour’s end. By then, either a gap up or gap down will be known. This pattern isn’t likely to remain inside Monday’s range without first trying to trend away from it intraday. A break higher might revisit last week’s highs without gaining traction. But there is little likelihood of recovering if sellers can make their presence known at the open. [/pay]