Trading Plan for 5/12
[pay]About that close (How the prior session ended)
Tuesday’s last surge was doomed before it began. It originated after the 1165.00 bias-up target had already held as resistance through the 1:20 timing window. Its failure could have triggered a dip to refuel buyers. But the dip wasn’t deep enough quickly enough to trap shorts. Instead optimistic buyers defended the 1160.50 bias-up signal as support into 2:30.
Those trapped buyers became sellers, further fueling the bounce’s reversal. A late bounce failed to recover 1158.00-1159.00 just like Monday’s last-minute surge. And this time the failure to hold above 1156.50 was more obvious. Rather than close at 1156.50, Tuesday’s cash session ended 3 points below it, while futures slipped another point to 1152.25.
Pattern points (And technical influences)
Also similar to Monday’s failed last-minute surge, the market extended down overnight, but without the wait. The slide extended into the Globex open, and accelerated to 1142.50.
The 1146.00 minimum target of Tuesday afternoon’s slide was sliced through as support, so now a bounce is acknowledging it as resistance. Oversold RSIs at the 1142.50 low make its retest likely. The low’s retest would be required if this setup had occurred intraday.
The low’s retest may as well be required. In my market wrap comments I noted how bearish Tuesday’s close was. Of the two possible bullish resolutions, only one remains – for a gap down to be attracted up by the gap back to Tuesday’s close. Even that was unlikely since Tuesday’s open already played that card.
Recovering the overnight dip to open up above 1156.50 would be bullish, assuming it also extended through 1160.50. Otherwise, the next lower objective is 1131.00, and it should be another interesting overnight.
Bottom line (My underlying premise)
There was no unfinished business above the market before Tuesday’s session, only the potential for testing 1164.00-1165.00. Now not even that remains. It’s not necessarily a sell signal, but it does create the vulnerability. And the only unfinished business that remains outstanding is at Thursday and Friday’s lows.[/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.