Trading Plan for 6/20

Monday night’s rally extended higher… through the morning. It also extended higher into Wednesday afternoon, until it didn’t. All of the afternoon’s extra gain was retraced. Too much optimism ahead of Wednesday’s FOMC?

Pattern points… (Setups and technicals)[pay]
Tuesday afternoon’s bias-up signal had triggered at 1353.00, but it was invalidated by exiting the bias environment back under 1353.00, and not entering the session’s last hour back above 1353.00. That’s not necessarily bearish.

The bias environment’s exit was probing under the noon hour’s 1351.50 low. Although lower lows were avoided, the session’s last hour was entered under the noon hour’s 1353.00 high. That’s not necessarily bearish, either.

Monday morning’s eventual bullish outcome had been the product of sellers failing several opportunities to regain traction. They duplicated the failed efforts Tuesday afternoon. While the afternoon’s early buying was retraced, sellers gained no traction for retracing it.

There are still ongoing indications that this leg of the rally is sponsored by weaker hands overall. All of which is consistent with last week’s lows having been relatively shallow. None of which prevents probing higher highs (e.g. 1361.50, 1364.25), while remaining vulnerable to a sudden, steep and substantial reversal.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Wednesday’s FOMC events will dominate the afternoon. Overnight selling pressure — or into the open — may be needed to help absorb an initially negative knee-jerk reaction down. Retesting Tuesday’s 1357.00 high — even if only proving above it overnight — would make a negative reaction much more difficult to recover, if not unlikely.[/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.