Trading Plan for 6/8

Tuesday’s close resembled Monday’s… refusing to close under 1284.50. Still ranging around 1286.25, the next big target under 1299.00. Tuesday’s bounce was all about refueling sellers, and they weren’t very refueled. The window is open for a bounce. A trap door will open otherwise.[pay]

Pattern points… (Setups and technicals)
The gap back to Monday’s 1284.50 close required being filled. Gapping up above Monday’s high could have nullified its attraction. The detour could have extended higher. In the end, Tuesday afternoon’s 12-point slide from 1295.00 also probed under Monday’s lows.

1284.50 was still being tested at Tuesday’s cash session close. It was still being tested at the futures close. So, 1284.50 held, while 1282.50 was tested and retested, and while RSIs diverged positively.

Price objectives below were neutralized by filling the gap, by probing the prior low, and by not closing under 1284.50. Technical objectives were created by RSIs diverging positively.

Only timing was not optimal, but timing is everything. A durable bottom could still form in this area after probing fresh lows early Wednesday and recovering. Meanwhile, the pattern remains vulnerable to resuming the decline aggressively.

What’s Next… (Outlook and opportunities)
Gapping up above 1292.50 would rob sellers of a lot of traction. Extending quickly through Tuesday’s 1295.50 high would trigger a bigger corrective bounce. It would only refuel sellers, and perhaps also neutralize Tuesday morning’s unfinished business above at 1296.50.

The most bullish scenarios cannot leave outstanding a gap below. So a gap up must react down to new lows and then recover. The risk is that new lows simply gain traction to resume the rally, but we’ll look at specific levels in the Market Tour.[/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.