Trading Plan for 6/30
[pay]Pattern notes.
Thursday’s day-long slide didn’t find much opposition Friday. Despite gapping up and then recovering from a momentary dip into negative territory, less than one hour was spent in positive territory. That doesn’t mean sellers gained much traction from Friday’s lower lows – the morning’s ESu 1279’00 and the afternoon’s 1272’75 – since the close settled back above both both.
And what about that close, at 1280’00. It was identified as a target long before interim price action gave 1337’50 a chance to launch another multi-week rally. That opportunity produced only a week-long consolidation before breaking lower. The current setup must also launch a rally, or else fall to new lows for the year.
Regardless of whether S&Ps bounce first, new lows are inevitable. The chart below depicts this year’s price action, showing that S&Ps have made a round-trip back to March’s pivotal low (the low prior to the actual low). Its retest all but requires either probing the actual low, or else breaking it sharply.
Indicators and Internals.
The 3-minute RSI was oversold at Friday afternoon’s low (highlighted green on the nearby chart), which should require the low to be retested. Internal spreads meanwhile were not lopsided – roughly 70% more NYSE down volume than up volume produced roughly 70% more declining issues than advancers – so there is no requirement to reward buyers for any relative productivity.
Monday’s opening setup.
End-o’quarter portfolio window dressing can’t possibly be a bullish factor as indexes attack the year’s lows. Not trading down aggressively might be another sign of sellers not gaining traction from their efforts. That said, a gap up Monday won’t be very credible for holding up through noon, let alone through the week.
All that buyers can hope for at this stage of the pattern is a corrective bounce, and it will be brief if started optimistically instead of by recovering from an intraday dip. NAPM is due 15 minutes after the cash session open at 9:45, and the market’s reaction could be very informative as to whether it is more afraid of falling further, or of rallying too quickly.[/pay]