Trading Plan for 6/9
[pay]Pattern notes.
Buyers hadn’t gained any traction by 3:20, so the surge afterwards – although steep and sizable – should not be durable. The 3:20 origin wasn’t entirely inappropriate for a durable recovery, just mostly. Anyway, it was probably no more than noise before the Dow Industrials switching out a couple of components, all the more reason for its gain not to endure.
Being too late to start, the surge was expected to hold any test of resistance through the close. And it did. From a standing stop under the morning’s highs, the first 9-point surge filled the gap back to Friday’s 941’00 close, then a 6-point surge probed 946’00. Then the cash session’s close dropped back down to 936’00.
Without the surge, Monday’s session was on-track to form “ineffectual pessimism.” Two intraday attempts to decline under 929’00 were each recovered through relevant timing windows, instead of remaining depressed and sliding. This created pent-up buying pressure that could have kept alive a recovery until Tuesday, the same as Friday’s stable afternoon kept alive the sell-off for Monday. But Monday’s buyers didn’t wait, and instead borrowed heavily against the buying pressure. Now there is no pent-up buying pressure available to help the surge endure overnight.
The session-long decline prevent positive territory from gaining traction and produced a drop into the close – albeit not quite into new session lows. And without recovering above last Monday and Tuesday’s 847’00-949’00 highs, the Gotcha’s trend reversal is valid.
Indicators and Internals.
Simultaneously overbought 1-minute and 3-minute RSIs at Monday’s high would all but require the high’s retest. Durable sellers don’t usually step in front of such strong buying. The high’s timing actually undermines buyers, but that doesn’t make the last-minute sellers any more credible. That said, delaying the drop’s resumption Tuesday would be likely to retest Monday’s high – and then some.
Tuesday’s opportunities.
The new bias signals will be similar to Monday, if not identical. There is no ability to trigger a session-long buy signal, since the last half-hour’s high was the session high. Any strength should be temporary, and resolved down by the close. That said, I would be uncomfortable selling early strength without having proof buyers had run their course.[/pay]