Trading Plan for 6/25
[pay]Pattern notes.
S&Ps fell 15 points from Tuesday’s high into the close. Another 3-4 points lower would have retraced the rest of yesterday morning’s no-bias rally back to its ESu 1309’00-1310’00 origin. Instead S&Ps have recovered overnight back up to 1323’75.
This happened to be the market’s position when yesterday afternoon’s no-bias signal signaled. I say “happened to be” because its no-bias decline didn’t require a retracement like the morning’s rally still does. Additionally, its retracement originated from a Symmetrical Triangle that developed during Tuesday’s last half-hour, a pattern whose initial breakout tends to be false.
Much can happen before the open in this environment, and probably will. And probably should. Gaps up don’t let buyers gain traction unless the gap is above a prior support or resistance that attracts new buyers. A gap up today would need to challenge yesterday’s highs to consider extending yesterday’s no-bias rally before retracing it. Otherwise, the retracement back down to 1309’00-1310’00 remains likely, where a steep, multi-session rally or decline would be likely.
Indicators and Internals.
MACD & RSI are diverging negatively as S&Ps test the 1323’75 highs. RSI was not overbought at the latest highs, so there is no requirement to retest them, which would allow a pullback here to become something larger. Yesterday’s sellers were very productive, producing 120% more declining issues than advancers on only 12% more down volume than up volume. Absent a gap up above yesterday’s highs to marginalize this reading, the market is obligated to reward yesterday’s sellers for their relative productivity.
day’s opening setup.
The market is sitting at resistance around 1323’00-1324’00, on a false break, with unfinished business below but none any higher. The open is 2-1/2 hours away, with Durable Goods due an hour before the open, and New Home Sales 30 minutes after the open. Not to mention the FOMC decision at 2:15. The optimism seems pretty thick – it can get thicker or it can be deflated to discount the compilation of unknowns just around the corner. This key to predicting this morning’s price action will be considering which of these two factors is influential. [/pay]