Trading Plan for 5/14

Was that a Friday, or March?… The session began with a bang, rallying sharply out of overnight lows. Then the afternoon whimpered lower, retracing back into the overnight range. If the weekend’s impending illiquidity couldn’t leverage an oversold market to rally, is the market really oversold?

Pattern points… (Setups and technicals)[pay]
Friday’s cash session began with a relief rally, because the Thursday’s post-close panic selling wasn’t gaining traction. That could have evolved into a monstrous rally to new relative highs. After all, the week’s sizable and lengthy intraday sell-all recovered to close back above 1349.75. If sellers couldn’t exploit the new bad news, they could get crushed.

In fact, sellers were crushed, by a surge from 1345.50 to 1363.25, testing the week’s prior highs. And it was a Friday, with two days of impending illiquidity. Any whiff of fresh highs could trigger the mother of all short-squeezes.

But there was no fresh high, only an entire afternoon for sellers to push back. And buyers had just expended a lot of energy to quickly rally from the range’s lower-end to its upper-end. So, Friday’s cash session ended with a drop back toward the lows, touching 1349.75.

1349.75 was still being tested at the close. Its reaction did not recover above any prior high or low. A decisive close would have put into play 1332.00, but we’ll assume it is in-play so long as Monday’s open doesn’t recover any relevant resistance. Otherwise, a strong enough open could still trigger a corrective bounce.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Don’t forget to join us at 9:30am ET for the Saturday Strategy Session, linked here.[/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.