Trading Plan for 5/18

What a volatile day… and what a flat close. The overnight bounce retraced back to overnight lows, and then lower, testing this leg’s objective. Closing unchanged only means sellers didn’t gain any new traction, since buyers didn’t gain any traction. [pay]

Pattern points… (Setups and technicals)
it may see like sellers sponsoring the decline netted nothing for their efforts since Tuesday’s close was essentially unchanged from Monday. But sellers did chip away at support. Despite holding a test of the decline’s 1319.00 objective (probed by 3 points), buyers didn’t exploit the decline’s hesitation.

A retest of 1319.00 is likely, whether overnight or intraday (normally intraday). Fresh lows under 1316.00 are not required, but recovering from so thorough a retest would be more bullish. And this deeper retest would not diminish the potential for an afternoon rally.

No fresh afternoon lows Tuesday disqualifies the pattern from being “ineffectual pessimism.” So, no immediate rally is signaled. However, an immediate rally could test 1334.50-1336.00 without a bigger rally gaining traction. Any higher would likely be tied to some sort of news, and therefore steep and potentially substantial.

What’s Next… (Outlook and opportunities)
An overnight dip to 1319.00 or lower could signal its recovery already underway back above 1322.75. Rallying first through 1331.00 could extend up to 1336.00 before resuming the decline to 1319.00, and perhaps much lower… This being expiration week, holding a retest of 1319.00 or breaking it would determine trending’s direction into next week. [/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.