Trading Plan for 5/19

Wednesday’s expiration indicator could have signaled a bottom… but it might be signaling a top. Retesting the decline’s target could have held to form a solid bottom. Has impatient buying trapped longs, instead? [pay]

Pattern points… (Setups and technicals)
Both of Wednesday’s bias-up signals triggered, and each fulfilled its target, despite my suspicions for each. The suspicions were based on the last-minute timing of each trigger. Sponsorship for the rally was lacking, but sponsorship for the decline lacked more.

Typical of the rally’s weak sponsorship, Wednesday’s closing bars repeatedly overlapped the afternoon’s 1339.75 bias-up target.  Its first test two hours earlier had also held, accompanied by overbought RSIs. Its reaction down down to 1334.75 was recovered without RSIs returning into overbought territory.

Was the rally just expiration related? The same would have been assumed had a probe of fresh lows been recovered. And a rally would have been signaled.

Having tested prior highs, instead, expiration might be biased down. Holding a more thorough test of 1340.00-1341.00 prior highs would have been more credibly bearish. Meanwhile, almost any failed probe of fresh highs Thursday, or aggressive selling, would prevent bouncing further into expiration.

What’s Next… (Outlook and opportunities)
Gapping down or spiking through  1334.75 would be credible for being a late rejection of 1339.75. Any shallower weakness would likely recover to probe a fresh high. And fresh highs have room up to 1343.00 without signaling a bigger rally underway. Three high-profile econ reports are released simultaneously after Thursday’s open, so any initial trending will likely either accelerate or reverse direction.[/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.