Trading Plan for 5/14

[pay]About that close (How the prior session ended)
Thursday’s ranging had formed a Symmetrical Triangle. The last chance to rally was missed when the afternoon’s bias environment lapsed after 2:30. A 15-point slide fell as low as 1153.75. But ultimately the last 45 minutes probed 1156.50 three times as support, where the session closed.

Pattern points (And technical influences)
1156.50‘s relevance dates back to it being the minimum objective of the drop from April’s highs. It’s not necessarily resistance now, any more than it was ever support. But it is still a good touchstone for whether buyers are gaining traction. It defined Monday and Tuesday’s closes, and the lower-end of Wednesday’s ineffectual optimism (session-long rally that only tested the prior day’s high).

Closing at 1156.50 Thursday confirms that buyers still haven’t gained traction. It doesn’t signal that sellers are gaining traction. At least, not directly. By not extending higher, buyers have opened the door wide for sellers.

Enter the Pivot Reversal setup, which Thursday’s price action formed: Gapping down after multiple gaining sessions, probing fresh trend highs intraday, and reversing to close under the morning’s low. The pattern identifies momentum reversing direction.

Thursday’s close was a little further under the morning’s low than optimal. Selling pressure was shifted from Friday’s session, perhaps too much to immediately resume Thursday’s decline. Once 1156.50 was touched, closing under it would have made the other issue moot. But as you see…

Bottom line (My underlying premise)
This being a Friday, the morning’s bias signal is likely to persist through the noon hour. A test of prior highs or lows must break early to have much chance at breaking at all. And if sellers aren’t going to gain traction, they may let buyers have a little bounce to refuel further – a bounce on which buyers might gain traction. The day could be subdued, or full of fireworks, but we should know early either way.[/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.