Trading Plan for 6/9

A horse! A horse!… Richard III had a whole kingdom at his disposal, if he only had a horse to get to it. Somewhat similarly, this decline has an opportunity to stage a significant corrective rally. Excessive pessimism, targets being fulfilled. It just lacks a trigger to put a rally into play. [pay]

Pattern points… (Setups and technicals)
A short-squeeze was so widely anticipated that it was preceded by two surges off of 1277.00. Actually, the two surges fulfilled it. So, rather than rally to new session highs into the close, new session lows touched the 1276.25 “new Globex trend extreme” whose intraday retest was all but required.

1276.25 was only touched, and not pierced or probed. Sure, nothing deeper was required. But the prior hour’s two surges reflected excessive optimism. Just touching the overnight low probably isn’t a bottom, either. In fact, a slightly lower low after the close has now touched 1275.25.

That wasn’t a terribly long wait for the fresh low. Perhaps enough excessive pessimism remains to help limit and absorb much more selling pressure. Once new sponsorship stops arriving to take the decline’s reigns, a fresh high through a relevant timing window could trigger a steep rally. The trend otherwise remains down.

What’s Next… (Outlook and opportunities)
Don’t forget that the front-month rolls to Sep at Thursday’s open. It trades at about a 6.25 discount to the underlying SPX index. No gap up can form a durable bottom in this pattern. But recovering 1284.00 would try. Otherwise, this leg’s next targets would be 1262.75 and 1259.25 – testing either and recovering back above 1265.25 could form a significant bottom.[/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.