Trading Plan for 5/16

[pay]Pattern notes.
A session’s two most unpredictable timing windows are the open and its close. Thursday’s close was a 7-point surge to ESm 1425’00. As it developed I noted that it wasn’t likely to be sustained, and four hours after Thursday’s cash session close it has been retraced entirely.

There is a flip-side to moves that develop during a window of unpredictability: irrelevance. This means that if Friday’s open were to gap down back to the 1418’00-1419’00 origin of Thursday’s last-minute surge, the gap back up to Thursday’s 1424’25 close won’t necessarily require being filled. And it probably won’t require being filled if a gap or spike down can exit the 10:15-10:30 timing window back under the last-minute surge’s 1418’00-1419’00 origin – not coincidentally also back under Thursday’s highs.

There are two windows for a downleg to begin from Thursday’s reversal setup. If Friday’s open doesn’t begin sliding almost immediately, then Monday’s open should gap down sharply. Not much later into the week starts to run into the potential seasonal bullishness ahead of Memorial Day weekend, and potentially a brief detour up to 1445’00.

Indicators and Internals.
The ratio of NYSE advancing issues to decliners didn’t keep pace with the ratio of up volume to down volume. This obligates Friday’s session to reward Thursday’s sellers for their relative productivity. MACD & RSI had diverged negatively into the cash session close, which the 6-point dip since then is already reacting to.

Friday’s opening setup.
Friday is expiration so beware of false starts and short spurts. This would be especially true during the opening sequence before 10:15. The morning’s econ reports play into this environment with Housing Starts at 8:30, followed by Consumer Sentiment at 10:00. This being a Friday, the morning’s bias signal could persist well past the noon hour.[/pay]