Trading Plan for 5/17

Wednesday morning’s rally was as impressive… as Tuesday night’s new low. And it was just as durable, which is to say, it was retraced entirely. But unlike the overnight low, the bounce’s high does not require a retest…

Pattern points… (Setups and technicals)[pay]
Once Tuesday night’s sellers had formed a “new Globex trend extreme” at the 1321.00 low, they could allow a corrective rally. New Globex extremes are almost historically mandated to be retested intraday. Meanwhile, they offer context to an interim bounce, defining it in advance as being only a correction.

This might seem irrelevant now, since the corrective bounce has been retraced already back under Tuesday’s close. But it could not be more relevant. The bounce was retraced only back under Tuesday’s close, and not yet back to 1321.00. The low was not much further below at 2:30 than it was at 4:00. Impatient buyers  caused the delay. This is just a different version of the detour rally’s optimism — a sizable detour that has refueled sellers yet again.

Wednesday’s Expiration Indicator was actively bearish by closing under support in a downtrend. It can still be rejected by Thursday’s open gapping up above Wednesday afternoon’s ~1332.00 high, if not also above Wednesday’s ~1340.00 high. Any shallower opening strength would be likely to peak much sooner, and to fall much harder.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Retesting the 1321.00 new Globex trend extreme down to 1318.00 could launch another bounce, even overnight. But I would not look for any productive bounce without first recovering 1327.00. Meanwhile, two consecutive closes under 1332.00 have officially put into play 1290.00.[/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.