Trading Plan for 6/19
[pay]Pattern notes.
I’ve tried dutifully to justify Wednesday’s price action as having completed a bottom. The session low once again held a test of the decline’s ESu 1337’50 target. That pretty much sums up the bullish argument. I’ll defer largely to yesterday afternoon’s blog entries for more detail. But essentially last week’s 1330’00 low still requires a retest, Wednesday’s close didn’t recover a prior high, and excessive optimism remains highly visible as recent as Wednesday’s late-afternoon surge from a momentary new session low.
The optimism might be artificially induced by Friday’s impending Quadruple-Witch expiration. By the same token, so might be the hesitation to begin a new downleg. We can’t get caught up in playing that game, but we should certainly be aware of the potential for sudden reversals triggered by position jockeying both going into and coming out of Friday.
Recent blog posts are littered with the potentially bearish factors. One more that hasn’t been listed would be the poor track record of expirations being accompanied by major market turning points. For that reason and the others, I will continue to be suspicious of rally attempts while awaiting a retest of last week’s lows where a break would trigger a steep, deep downleg.
Indicators and Internals.
Internal spreads weren’t very lopsided between advancing and declining issues and between up and down volume. That’s somewhat surprising considering the open’s gap down and entire session spent in negative territory. MACD & RSI had signaled the low of Wednesday’s last-hour decline, but the bounce it produced was ended by MACD & RSI deteriorating.
Thursday’s opening setup.
Wednesday’s late-afternoon bounce attacked session highs at 1346’25, but tracked a template capable of producing new session lows at least 12 points lower. The drop produced only 8 points before the close, but 1335’00 was just touched overnight. Much can still happen before Thursday’s cash session, but it is currently indicated to gap down at Wednesday’s lows.
These gaps down do expend selling pressure without helping sellers gain new traction, so one bullish setup would be for a gap down to probe new lows and recover into the noon hour. Thursday’s calendar has high-profile reports before and after the open which helps volatility, and the chance for a near-term bottom. But the potential for a durable bottom is another matter.[/pay]