Trading Plan for 6/5

Well, that was interesting… Plunging overnight to within 1 point of the next objective, retracing it all into the open, fluctuating widely between the two, and then closing essentially unchanged. A rally would be premature, but the burden of proof is on sellers.

Pattern points… (Setups and technicals)[pay]
Monday’s open gapped up in a downtrend, but was then reversed to new trend lows. Closing back above the morning’s high would have formed a “pivot reversal” setup. And that could have ended the decline.

But pivot reversals are unlikely to form without also retesting any overnight low. And there is still unfinished business below at the 1262.00 “new Globex trend extreme” which requires an eventual retest intraday. Rallying before then could be productive, but only temporarily.

Being unlikely to form a pivot reversal, Monday afternoon’s recovery attempt did not close above the morning’s high. It did not even close positive. No pivot reversal formed. Still, closing above the noon hour’s high did prevent sellers from gaining traction. So, resuming the decline all but requires gapping down.

Not gapping down Tuesday would be likelier to retest Monday afternoon’s 1279.25 high. Any further delay in resuming the decline could gain traction up to the 1295.00 area. Otherwise, a retest of the 1262.00 low —  probably down to 1259.50 — could hold, but it would be vulnerable to breaking lower.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Monday afternoon’s attack on the overnight low did not neutralize its attraction. And it didn’t form any more durable support. But the pattern will be difficult to recover if tested from above. Maintaining a probe of fresh lows through a relevant timing window could force the decline to extend considerably. [/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.