Trading Plan for 6/2

If the decline has resumed… then it is compensating for the delay, retracing four days of improvement in one single day. And except for the potential of an oversold bounce, lower targets remain outstanding. [pay]

Pattern points… (Setups and technicals)
Rejecting Tuesday’s close above 1337.50 had several consequences. First, it confirmed the bounce since Tuesday night’s 1302.25 low was only a correction of the drop from May’s high. Second, it confirmed Tuesday’s late surge was sponsored by weak hands, which only increased the pent-up selling pressure. And third, having been delayed, it meant the decline would resume more aggressively.

Meanwhile, since Thursday and Friday avoided closing back within the 1312.00-1320.00 range, a probe of its lower-end became likely. Wednesday’s 1311.25 low was not that probe.

So, there are two competing influences trying to take control of Wednesday’s close.

A bounce has potential since 1311.25‘s test was accompanied by 1-minute and 3-minute RSIs diverging positively. And the 1312.00-1320.00 range’s lower-end was still being tested at the close, instead of being broken decisively. A bounce has room up to 1319.50, perhaps even up to 1325.00 before resuming the decline.

Otherwise, the decline’s momentum remains intact. The next lower objective is an intraday test of last Tuesday night’s 1302.25 low, a “new Globex trend extreme.”

What’s Next… (Outlook and opportunities)
The first opportunity to rob sellers of their traction would be to recover 1315.00. Any bounce can develop and fail overnight to resume the decline at Thursday’s open. But gapping open up or down will create unfinished business, since openig gaps are often retested.[/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.