Trading Plan for 6/24
[pay]Pattern notes.
Yesterday’s last comments noted that steep drops like Friday, when followed by an inside day like Monday, tend to resolve down… Any rally prior to printing lower lows would be expected to fail. An overnight rally eventually reached ESu 1322’50. But only 30 minutes was needed to plummet 15 points down to 1307’25, 8 points under Friday’s prior low.
This indicates a gap to be outstanding from yesterday’s close. Add it to Friday’s gap from Thursday’s close, which eventually begins to suggest that sellers are getting ahead of themselves. That could allow this morning’s selling to find a near-term bottom capable of producing a meaningful bounce like 25 points before resuming the decline to its eventual 1280’00 target.
Indeed, I suspect that simply continuing lower without first refueling would require selling pressure capable of pushing the market to new lows for the year. After all, buyers did fail to exploit a potential bottom at the prior downleg’s 1337’50 target. So this is pretty critical stuff developing before our eyes.
Indicators and Internals.
The 3-minute RSI was oversold at the 1307’25 “V” low, requiring its eventual retest. The indicator printed overnight, and there is plenty of time to fulfill the retest pre-open. But indicators were so deeply extended that the price low’s retest might find it difficult to reverse up or even to bounce without delay.
Tuesday’s opening setup.
The most relevant numbers at this level are this morning’s bias parameters of 1309’00 and 1314’00. S&Ps currently sit in the middle at 1311’50 after having bounced 5 points off the low. Lower lows would target 1300’25, either from bouncing to 1314’00 or else from first breaking under 1309’00.
The normal array of weekly retail sales metrics is due pre-open, then Consumer Confidence at 10:00 – timing that often reverses or accelerates any initial trending underway. Anxiousness ahead of Wednesday’s FOMC decision might compel shorts cover, thinking the market might be discounting too much bad news. But I don’t see anxiousness ahead of the FOMC news actually paralyzing price action.[/pay]