Trading Plan for 5/1

[pay]Pattern notes.
Thursday’s session did what Wednesday’s session did, and it did what Wednesday’s close did not. Both opens gapped up, both sessions probed new highs intraday, and both sessions’ gains were retraced back under the two prior bounce highs. Thursday’s retracement got a head start on Wednesday, peaking 90 minutes into the day instead of 90 minutes before its end. That provided an opportunity for buyers to regain their lost ground. It was an opportunity lost.

Sellers can’t be blamed – not yet: Thursday’s cash session closed negative by less than 1 point, thanks to a last-minute push down, and thanks to Wednesday’s last-minute push up. Buyers have only themselves to blame. After nearly four weeks of essentially ranging sideways, once again probing the range’s upper-end, buyers are weak. It’s not bearish, except that it invites sellers, much the same way a piece of chum can attract sharks.

Sellers can be blamed – not officially: Futures continued dropping after the cash session close, so far coming within 1 tick of Wednesday’s post-close low. There was no reason to reverse the entire gain after probing new highs unless the market’s intent were to continue dropping.

Sellers won’t be blamed: If a session doesn’t close under a prior low. Each morning’s higher high has opened up room to absorb intraday selling without it damaging the chart. The characteristics of the past two days of selling suggests that the open’s buyers are the type that appear at highs. That’s the first step to forming a top, buyers lose traction. Now we’re monitoring for the second step, sellers gaining traction in their place.

Indicators and Internals.
Thursday’s last technical signal was at the cash session low, with simultaneous oversold 1-minute and 3-minute RSIs. The vulnerability to a bounce was fulfilled, and the low was retested immediately after the cash session close. This setup might be attractive enough to be retested intraday Friday, too, but there is otherwise no active technical setup.

Friday’s opportunities.
The break underway into Thursday’s close targeted 857’00, which is still in-play. Follow-through might be limited to 851’00 after gapping down there Friday – if there were any follow-through or gap down, at all. A gap up above Thursday afternoon’s 875’25 high would signal a session-long rally underway. This being a Friday, the morning’s bias signal is likely to persist past the noon hour. The econ calendar is busy, but in place of April’s Employment Situation report there is some sort of Gheitner appearance.  [/pay]