Trading Plan for 6/19

If the recovery has been waiting for FOMC’s news… then its sponsorship isn’t strong-handed. And the ranging since Monday morning has been distribution, not accumulation. Strong hands would not have worked so hard for so long just to avoid a fresh low, not without already having rallied. The rally’s delay in that context tells us its sponsorship is weak hands.

Pattern points… (Setups and technicals)[pay]
The FOMC reaction finally get the the market out of its quagmire. A quick sell-off to dump ballast and weak longs could have achieved the same thing. The latter would have trapped shorts and refueled buyers, suggesting more than just a retest of last Monday’s high is in-play. Instead of giving sellers more rope to hang themselves, the rally wasted the past two days by ranging sideways.

Regardless, a 16-point rally produced a new high close. Last Friday’s close was a new trend extreme, requiring a subsequent higher close, and the requirement is now neutralized. That’s not a sell signal. In fact, Wednesday afternoon’s buyers gained traction so higher highs are likely intraday Thursday — a morning dip would be likely to recover.

A second consecutive higher close would be similar to the Friday trend high close, requiring at least one additional higher close. Wednesday’s rally was likely exacerbated by this week’s expiration, so nothing can be taken for granted. Volatility and intraday directional changes seem to be alive and well.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The WedEX indicator signaled passively bullish. The new high close was clearly bullish, but originating from within a consolidation — and not already trending — is too late to be active. Regardless, the influence is on Friday afternoon and Monday morning, so a pullback through Friday morning can’t be discounted.[/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.