Trading Plan for 5/12
[pay]Pattern notes.
Monday’s gap down extended lower into the cash session open, and then a little lower from there. Selling didn’t resume until the last hour’s drop back to the morning’s low, whose technicals factors had already required its retest. So this magnetic attraction to lower prices has been neutralized.
This objective was neutralized, but another remained outstanding: the gap back to Wednesday’s 903’50 cash session close. Not that all gaps must be filled, but Wednesday’s futures gap was filled during Monday’s open, and the other normally follows soon after. It’s not a particularly strong magnetic attractions, and the only other one isn’t either. Monday’s close under Friday’s low wasn’t very bearish because Friday’s session was an otherwise irrelevant inside day.
Monday’s session was not an inside day. It was the second consecutive day to trade within Thursday’s range, but that is not directionally relevant. However, it does underscore the lack of improvement in three consecutive days. Financial media is turning bearish – seemingly everyplace from weekend articles in FT.com and WSJ.com, and CNBC’s theme the day – and that’s often reason enough to turn bullish. Let’s just say it’s enough reason to expect an attack on Friday’s high before sellers gain traction.
Neutralizing the retest of Monday’s opening low came within minutes of the close. New sponsorship had no time to gain traction, whether for a reversal or for extending the drop at an accelerated pace. This is a state of equilibrium whose first trending attempt tends to be false, fully retraced, and reversed more substantially in the opposite direction. Unless Tuesday’s open gaps down under Thursday’s 899’00 prior low, I’m expecting the session to range back up to Friday’s prior high.
Indicators and Internals.
RSIs at Monday morning’s low were simultaneously oversold. This situation doesn’t tend to attract durable buyers, making the low’s retest likely. Technicals were relatively improved on the low’s eventual retest, leaving no unfinished business.
Tuesday’s opportunities.
The econ calendar isn’t particularly high-profile. Any trending maintained beyond either end of the recent range would be that much more meaningful. Meanwhile, attempts to trend beyond the range are likely to fail, like a test of the gap back to Thursday’s 903’50 close. Almost any slightly weak open is likely to recover.[/pay]