Trading Plan for 5/15

[pay]Pattern notes.
Thursday’s session essentially trended up, while remaining within Wednesday’s range. It’s not really trending, although buyers were the ones expending their energy. Wednesday’s session was similar for trending early, and then ranging through the afternoon. Wednesday afternoon’s ranging was ineffectually pessimistic, probing new session lows without ever breaking lower. Thursday afternoon’s ranging was ineffectually optimistic, probing new session highs without breaking higher.

It was evident early on that Thursday’s session wasn’t going to cover new ground. It wasn’t necessarily the typical “drycleaners” day, but the chart offered nothing new except the passing of another day. Friday’s expiration day is likely to share the same characteristic, essentially ranging sideways, albeit much more choppily.

The exception is that any trending Friday will need to begin by gapping away from Wednesday and Thursday’s range. A gap up maintained above 899’00 would be likely to trend higher intraday, and a gap down under 888’50 would likely extend down. Special emphasis on that “maintaining” part, because either level is resistance or support until exceeded through the opening sequence.

Was the recent drop was just the rally’s latest self-preservation tactic – discounting price so expiration influences can lift price back up? Typically, Friday’s open would hit the ground running, meaning that Thursday afternoon should have already been in motion. But Thursday’s motion was essentially sideways. Unless the open gaps up above Thursday’s highs, any later gains will likely be retraced. And meanwhile the session would more likely trade flat to lower – sharply lower, if at all.

Indicators and Internals.
RSIs and MACDs became overbought into session highs Thursday afternoon, but without making higher highs along with price, so there is no unfinished business above the market.

Friday’s opportunities.
The opportunity to gap open either way will also have a catalyst. Plenty of econ reports are hitting the market before Friday’s open, and after. It starts with CPI pre-open at 8:30, and ends with Consumer Sentiment 25 minutes into the cash session. If the open chooses not to gap, the session probably won’t want to trend. This being a Friday, the morning’s bias signal will likely persist well past the noon hour.[/pay]