Trading Plan for 5/16

Last Friday’s close was bearish… but perhaps too pessimistic to extend down immediately. So, the market took a round-trip instead of a dive. This Friday’s close was just as bearish. Could it still be “too” pessimistic? [pay]

Pattern points… (Setups and technicals)
Friday’s close was eerily similarly to the prior Friday’s close. A steep, deep morning drop led into a narrow consolidation at the lows. No afternoon bounce. No afternoon break lower. Differences between their exact lows’ timing were not meaningful. Their structures were the same.

Two similar consecutive setups tend not to resolve similarly. If the prior week’s version of the same pattern resolved up, then this current instance should resolve down.

The path down could simply trade down without delay, or include a detour that bounces first up to 1340.00-1341.00. A new downleg may be averted by recovering 1344.00 through the morning. Otherwise, any bounce remains likely to resolve down.

What’s Next… (Outlook and opportunities)
Any pattern indicating a break under 1332.00 would be expected to probe sharply lower lows. Obligatory support is possible at the prior week’s 1325.25 low, but the next real objective would be 1319.00. A much more attractive target would be 1299.00. Opening strength no greater than 1340.00-1341.00 would still be likely to resolve down. [/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.