Trading Plan for 5/11

[pay]About that close (How the prior session ended)
The afternoon’s 1153.00 bias-down signal wasn’t even touched until the noon hour ended. Its break was still valid – in fact, its 1147.50 bias-down target was quickly met, and later probed by 3 points. But the break’s sponsorship came too late to be durable. So there was no bearish posture.

Almost the entire afternoon had elapsed. The last half-hour finally compensated for the delay by surging into the close. Just closing above 1151.00 or above 1153.00-1154.25 would have been considered for holding long through the close. But extending back up to 1158.00-1159.00 borrowed too much pent-up buying pressure. It wasn’t a sell signal, and it could extend higher without further delay. But there is vulnerability to dipping overnight.

Pattern points (And technical influences)
Monday’s bounce was of unusual dimension. But its recovery above prior highs was still a recovery above prior highs, and that’s what dictated how it might react. Although those recovered levels had been visited only briefly on the way down, their support was still unlikely to give way on a first test. In fact, they held, and their test ultimately produced a surge into the close.

There is no unfinished business above – there is only the potential to probe Monday’s highs to 1164.00-1165.00, and perhaps even gain traction for 1175.50-1177.25. But having chipped away at so much support for so long Monday, the eventual retest of Monday’s lows will be less likely to offer similar support.

Gapping down Tuesday under Monday’s ~1145.00 lows would negate the potential for probing higher highs. But retesting last week’s lows would be hampered by support at 1131.00-1132.00. Temporary support, but a delay mechanism nonetheless. Dipping too far for too long may not recover, or may take an extended detour below. Otherwise, the next objective is above Monday’s highs.

Bottom line (My underlying premise)
My favorite question in the chartroom Monday was essentially whether similarities between Friday afternoon’s pattern and Monday’s  (which had not yet surged) could be pointing to the same outcome. Despite differences of timing between the two, the answer has more to do with Friday’s pattern being bearish and the weekend’s news blind-siding it. One trillion euro will generally trump an active signal. No pattern can be assured to resolve perfectly when government intervention decides to play.[/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.