Trading Plan for 6/23

[pay]About that close (How the prior session ended)
Tuesday’s 1105.50 bias-down signal was probed during the no-bias environment. Its sellers weren’t trapped because the 1099.50 bias-down target was exceeded by a leg already underway when the bias environment started lapsing at 2:30. The break consolidated in a Flag pattern that resolved down to 1090.00. Sellers would have lost traction from only a  3-4 point bounce, which the entire last half-hour failed to do.

Pattern points (And technical influences)
So, sellers gained traction. Having tested relevant support at 1090.00, recovering to close back above 1093.00-1094.00 would have meant the late sellers were weak hands. Not being sponsored by weak hands, the drop can allow a brief bounce to refuel by trapping buyers.

The trick is in not letting those buyers gain traction. A test of the 1098.50-1101.50 area (beginning at the chart’s red line) would be likely to resolve down. An intraday rally could attack 1110.00 and still resolve down. Just closing back above 1098.50-1101.50 would trap Tuesday’s shorts for a squeeze.

This week’s Symmetrical Triangle (defined by green trendlines) is a pattern whose initial break tends to false in the wrong direction. The most common exception is when the break is premature. Overbought RSIs at the triangle’s 1114.50 high want to be retested, as does the gap back to Monday’s open (circled green). So does Sunday night’s “new Globex trend extreme” (not shown), but none has any particular timing.

Avoiding a recovery Wednesday would be very bearish, since the trend is trying to reverse down. Tuesday’s drop was the first to close back under a prior low (in red rectangle). No immediate lower close is needed for confirmation. Its signal can only be negated by Wednesday’s close recovering the ~1101.50 prior low.

Existing Home Sales data was surprisingly weak Tuesday. Don’t think this is already discounted for the New Home Sales data coming Wednesday – look for a negative reaction if it confirms, but not necessarily a rally if it doesn’t. Also, don’t forget about the language accompanying the afternoon’s FOMC rate decision.

Bottom line (My underlying premise)
There is plenty of unfinished business below to attract price down. Two outstanding gaps are circled. The first is from last Monday at 1086.00, and its test might trigger a temporary obligatory bounce. So long as a bounce doesn’t get carried away, the two-week old bounce has ended and a new downleg is underway.  [/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.