Trading Plan for 6/17
[pay]Pattern notes.
The selling through Monday’s open never regained traction intraday. A dip attacking 915’00 was recovered and never extended down. But sellers weren’t really pushed back – not intraday, and not overnight – not until the early hours before Tuesday’s open pushed up to nearly 925’00. The template predicted flat to lower price action through the morning, trading to and/or through 918’00, opening the door to aggressive afternoon sellers.
Similar to the late arrival of overnight buying pressure, sellers waited until late-morning before influencing price action. This forced their efforts into a compact window, producing a steep drop to the target area. This also forced the afternoon’s break under 918’00 to be steep – steeper, actually. And deeper, eventually touching 906’50.
Another bounce attacking 914’00 once again waited longer than normal before peaking, so the last 15 minutes plunged 7 points into the close. The entire false breakout fropm last month’s triangle (defined by green trendlines) has been retraced back to its first origin (yellow highlight). The interim consolidation (defined by red trendlines) need not be retested at all, ever.
The next trending should either retrace some of the past week’s drop, or else accelerate its pace. How does a vertical drop accelerate its pace. Not pleasantly. Remember the warning at Friday’s close: with no unfinished business above, and no untested support below, aggressive selling was likely. Once again there is no unfinished business above, and no untested support below.
“Higher prior lows” from the past two weeks were produced by testing earlier “lower prior highs” as support. This characteristic dilutes the attraction back to the higher levels. To the contrary, finally breaking through support tends to encourage more selling pressure than was expended. That principle won’t be pretty if the opportunity arises to apply it to a retest prior lows around 875’00.
Indicators and Internals.
Although 1-minute RSI became oversold at Tuesday’s last-minute low, 3-minute RSI only approached oversold levels, leaving plenty of room to deteriorate further.
Wednesday’s opportunities.
The econ calendar fairly active, and Bernanke speaks. The next lower targets were 903’00 and 900’00. Tuesday’s last-minute final drop might have rendered those levels moot – at least, regarding their ability to produce a bounce. Leaving the 900’s behind probably won’t find many bottom-fishers. A third day of lower lows at this stage of the pattern would attract sellers, not satisfy them. By the same token, almost any chance at a corrective bounce requires starting early, since further damage would risk reinforcing a downleg’s sponsorship.[/pay]