Trading Plan for 6/20

If the market intends to retest May’s highs this year… then it probably can’t afford to extend down much lower this week. And it does want to extend down.

Pattern points… (Setups and technicals)[pay]
Wednesday morning’s narrow ranging in slightly negative territory seemed at odds with the wide overnight moves. The FOMC reaction compensated for the delay. The two overnight extra tests of 1648.00 resistance weren’t compensated with any higher high, but that wasn’t even obligatory, let alone required.

The plunge neutralized the attraction back to Monday’s oversold RSIs at 1623.75. Ironically, that was the product of an afternoon plunge triggered by a warning about Wednesday’s FOMC meeting. It was recovered to Tuesday to fresh highs. That had fulfilled potential up to 1646.50-1648.00, and held.

With attractions above and below neutralized, there is no requirement either to trend up or to trend down. That is the only reason Wednesday’s close did not qualify for a “hold-short.” There is vulnerability overnight Wednesday and Thursday to fill the gap back to last Friday’s 1618.00-1620.00 close. But no assurance of its test, of its test breaking, or of its test overnight reacting up sharply into Thursday’s open.

Extending down any further would next target 1612.50 and 1604.00 — presumably on the way to 1585.00 and lower. Bounces have room up to 1638.25 before even suggesting a downleg would not develop immediately. Above 1645.50 would begin signaling a probe above May’s highs.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Wednesday’s Market Wrap recording is a more thorough review of the session’s relevant points. It also describes more thoroughly the passively bearish WedEx signal, and what Thursday’s open can or must do to validate or invalidate it. [/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.