Trading Plan for 6/25
If Tuesday’s reversal is part of a durable top… then would it be more serious to extend down through Wednesday, or to spend more time testing the highs? The latter, I think. The past week has been highly volatile since the FOMC decision, so a lot of selling pressure has been expended just to attack that pivotal price point. Sellers might need to be refueled by a bounce.
Pattern points… (Setups and technicals)[pay]
I had noted coming out of the noon hour that the only upside objective outstanding was a new trend high close, which need not be fulfilled on any particular schedule. Probing nearly 5 points above it to 1960.00 seemed capable of getting that done.
Several hour remaining in the session proved more capable at doing something entirely different. The reversal triggered a bias-down targeting 1948.75, forming a five-stage pattern whose risk was to extend the decline considerably. It did, down to 1942.50. That’s where the session closed, after dipping as low as 1939.75.
A lower low Wednesday is likely, since sellers gained traction for their efforts. The bias environment exit at 2:30 was under the noon hour’s low, and the final hour’s entry was at or sliding through the bias environment’s low. Retracing last Wednesday’s FOMC reaction back to its origin around 1935.00 would be a candidate for the lower low.
Could a fresh low Wednesday morning bring a quick end of a brief, albeit aggressive, pullback? Recovering back above a relevant high through the bias timing window or bias environment exits would be credible targeting last Friday’s 1955.50 high. But entering Wednesday’s noon hour under Tuesday’s low would get every benefit of the doubt for extending down much more substantially.
[/pay]What’s Next… (Outlook and opportunities)[pay]
What actually triggered Tuesday’s drop? Central Bank criticism is passe. I’ve been acknowledging the triple secret rehypothecation scandal that has been resurfacing. But the only simultaneous event was the 2-year auction. Wednesday brings the 5-year. Anxiousness ahead of it could discount enough fear for a favorable reaction. The morning isn’t lacking for high-profile econ reports. [/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.