Trading Plan for 5/18

[pay]About that close (How the prior session ended)
Monday’s last half-hour surged 12 points higher, and the session’s close was in the process of testing 1135.00-1136.00. Deja vu. That’s how Friday’s session closed, too, surging 12 points to the same area.

Pattern points (And technical influences)
Friday’s surge was noise. Its buyers didn’t gain traction despite expending a lot of energy. The combination created a vulnerability to reversing down, which came Sunday night. Monday’s surge wasn’t noise, but it may have already fulfilled the pattern that created it. Not leaving buying pressure pent-up overnight also creates a vulnerability to reversing down.

Anyway, Monday’s buyers didn’t gain traction either. The overnight and intraday dips created a lot of room to absorb buying pressure. A rally needed to recover a prior high but buying pressure was already gone by then.

Monday’s noon hour low at 1112.75 finally delivered a break of the Descending Triangle that had formed Friday afternoon. The overnight low had required a retest since it was the product of a unique downleg. Monday’s intraday drop wasn’t just a retest, so the oversold RSIs at its low also require a retest.

Bottom line (My underlying premise)
An opening dip Tuesday has room down to the 1131.00 area before sellers start gaining traction to retest Monday’s low. Rallying at Tuesday’s open would be bullish, preferably by testing Monday’s highs as support by then, after pulling back from higher highs overnight. If sellers gain traction at the open, a third consecutive recovery from lower lows would be unlikely. Buyers gaining traction would have potential to 1156.00 or higher.[/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.