Trading Plan for 5/17

The low is dead, long live the low… The only requirement for the current decline has been to retest last Thursday’s 1325.25 prior low. Done. There are reasons for the retest developing into something much bigger. And there is a small window available to avoid it.[pay]

Pattern points… (Setups and technicals)
1325.25‘s retest was the decline’s only requirement, and it is now neutralized. But the two extra tests of last Thursday’s interim high refueled sellers for something more substantial.

Also, the prior low wasn’t tested until the session’s final minutes. Such a late retest of a prior extreme generally doesn’t ultimately hold. Finally, each low shared a similar “V” character, and two “V” bottoms do not a durable bottom make.

Since the minimum objective was met and held, it is possible that near-term selling pressure has been flushed out. This would open the door for another bounce to further refuel sellers. But not bouncing into Tuesday’s open would likely mean gapping down sharply – i.e. trending down overnight.

Monday’s close ended by bouncing slightly despite probing fresh lows. Buyers didn’t gain traction. The 3:10-3:20 window could have formed a bottom by recovering from a dip, but optimism prevented even is attempt. These factors suggest more selling pressure in reserve.

What’s Next… (Outlook and opportunities)
In fact, S&Ps spiked down 6 points to 1320.50 at 4:30 while finishing this post. The market-on-defense mode became obvious by Monday’s  close, so it should become more obvious through Tuesday’s open. Recovering 1335.00-1336.00 through a relevant timing window could suggest another rogue detour forming. But it would still be all about refueling sellers. [/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.