Trading Plan for 6/6

NDX underperformed S&Ps at twice Friday… by not retesting the morning’s high, and by breaking the pre-open low. That’s the speculative index, and recovery attempts don’t succeed without its participation.[pay]

Pattern points… (Setups and technicals)
Friday afternoon’s drop stopped short of touching the 1296.00 opening print. That’s optimism. It stopped short of touching the 1294.50 pre-open low’s “new Globex trend extreme.” That’s also optimism.

All other elements to Friday’s price action reflect pessimism. And that keeps alive potential for a recovery attempt.

Friday’s spike down on the Employment Situation report was preceded by a lot of pessimism. Its recovery was prevented by fears ahead of exposure into the weekend’s illiquidity. And the recovery never turned positive.

Let’s see… gapping down, probing new lows, and spending the entire day in negative territory is pessimism. But it wasn’t “ineffectual pessimism” since no new afternoon low was rejected.

So, the drop’s momentum remains intact. Gapping up above Friday’s 1307.50-1309.00 highs would rob the decline of its traction while also reversing momentum up – not for a durable rally, but for a sizable corrective bounce. Meanwhile, the next lower objective is 1286.25, whose break would confirm the bear market had resumed.

What’s Next… (Outlook and opportunities)
1-minute RSI diverged positively into Friday’s futures close, but 3-minute RSI continued deteriorating closer and closer to oversold territory. Closing under 1298.00 would have made a compelling argument for holding short through the weekend, but the cash session closed at 1299.00 – futures closed under 1296.00. If that doesn’t mean sellers have gotten ahead of themselves, then it could be an ugly ride down to 1286.25 and through it.

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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.