Trading Plan for 6/3

[pay]About that close (How the prior session ended)
Wednesday’s break above the 1085.00 buy signal came with a change of character. A 15-minute 5-point gain from 1080.25 suddenly steepened. The gains extended as the last hour began, until the last half-hour began. The 1093.00 target had been met, but another surge began when the position-squaring window ended, gaining 7 points to test 1098.00.

Pattern points (And technical influences)
Tuesday morning’s failed rally had begun from a drop to 1070.00. Wednesday’s rally began from another drop to 1070.00. Tuesday’s rally was signaled by RSIs diverging positively, oversold RSIs preceding Wednesday’s open created a vulnerability to rally. Tuesday’s RSIs left no unfinished business below, so there was no reason for its rally to fail unless its lows would eventually be probed. Wednesday’s oversold RSIs do require a retest, and so does the gap back to Tuesday’s close.

Like Tuesday’s 1070.00 low, its 1094.00 high didn’t require a retest Wednesday either. And I’m surprised that it was retested at all. But I’m not surprised that its retest originated after the position-squaring window, and by a last-minute surge. These characteristics identify the retest’s sponsorship as being weak hands.

Wednesday’s open can still validate Tuesday’s late surge by extending higher without delay, and not looking back. Objectives would include May 19’s “higher prior lows” at 1107.00, and gaps back to the 1109.75 and 1113.00 futures and cash session closes.

Extending higher, and then looking back – i.e. probing prior highs but reversing into negative territory – would let sellers gain traction. An initial pullback otherwise could retrace Wednesday’s last-minute surge down to its 1091.00 origin without rejecting it. Any lower through the opening minutes would threaten the afternoon’s 1080.25 low.

Bottom line (My underlying premise)
Bullish scenarios rely largely upon tempered gains. First, avoiding weakness at Thursday’s open could marginalize sellers through the day. Second, closing Thursday above prior highs could be bullish if higher targets are left in-play. Carrying this momentum overnight would help to absorb Friday’s pre-open Employment Situation report. And that would marginalize sellers into the weekend. If sellers are going to retake control this week, it should be obvious by the afternoon.[/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.