Trading Plan for 6/24

Getting ahead of itself… Technical issues undermining Wednesday’s highs, were combined with the negative reaction to Bernanke. The attraction back down to last week’s lows accelerated the drop’s momentum. The drop got ahead of itself. But it did not end. [pay]

Pattern points… (Setups and technicals)
Thursday’s post-open pattern eventually created a minimum target of 1257.25. Its test and retest launched a rally up to 1270.75. The decline resumed from there, targeting fresh lows. End of story.

Actually, there was a plot twist when Greek’s latest bailout developments made news. And there was another rally back up to the 1277.75 overnight highs.

But there was not a new accumulation pattern. And there was not a retest of last week’s oversold RSIs at the 1252.25 low. So, there is not a bottom. There can be another sizable rally – but its failure would be as likely as the last two rally legs.

Meanwhile, note the pattern that formed from the Greek deal’s reaction. Its interim consolidation was sloped upward, with higher lows. This reflects optimism. It is “excessive” optimism since the interim consolidation’s purpose was to create pessimism. Instead, the ill-timed optimism is sorely missed just when it is needed most, to break above the prior high.

The prior high at 1277.75 was being tested into Thursday’s close. It should be rejected immediately if the corrective bounce has ended, and to avoid extending into another sizable rally.

What’s Next… (Outlook and opportunities)
A sizable rally could be underway if Friday’s open were to recover 1280.00-1281.00. Otherwise, a retest of Thursday’s 1257.25 lows is likely, whose break would target 1251.00. Dipping back under 1275.75 overnight could start the next downleg without further delay. [/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.