Trading Plan for 6/18
If the multi-session decline ended with its Monday objective… then is the recovery already underway? Nothing about the interim price action could be construed as rallying. Yet, 61.8% of the drop has been retraced at Tuesday’s high. Is the non-rally already due for a corrective dip?
Pattern points… (Setups and technicals)[pay]
I had warned in Tuesday’s pre-open First Trade blog posts that the overnight probe above Monday’s highs was unlikely to extend, since buyers had not gained traction the prior afternoon. Its 11-point reversal down through the morning got aggressive. Largely retracing the dive didn’t make it any less vulnerable, and another dip retraced much of it.
But the pre-open probe of fresh highs did foreshadow Tuesday’s relentless optimism. Two morning dives didn’t dissuade a recovery through the afternoon. The last 60-90 minutes ranged around Tuesday’s pre-open high.
It’s still suspicious. Not just for its timing, and since its buyers once again failed to gain traction — but also because it held 1935.50 which is a 61.8% retracement of the drop from last Monday’s high to last Thursday’s low. Closing above it would have been bullish. Reacting down from could have been bullish. But closing at it makes the next trending attempt much likelier to be down. Its likely target is a retest of Monday morning’s oversold RSIs down 1921.50.
Extending higher first would target 1938.50-1940.00. A pullback from there would likely be absorbed. But extending higher first is less likely.
[/pay]What’s Next… (Outlook and opportunities)[pay]
Wednesday afternoon’s FOMC news is among the most reliable events for triggering extremely volatile price swings. This cycle includes the quarterly Chairman’s Q&A, a relatively recent advent that has been forming reliable patterns of its own. Wednesday’s close may trigger a WedEX signal that forecasts a bias into and out of the weekend. This tends not to develop when price has been probing new trend extremes, which the current environment has not. [/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.