Trading Plan for 5/19

If expiration encouraged the week’s sell-off… then guess what expiration lapsing will encourage. Hint: It’s not a trick question.

Pattern points… (Setups and technicals)[pay]
Friday’s pre-open surge touched the morning’s 1871.25 bias-up signal. That was too little and too late to extend  after Thursday afternoon’s buyers had failed to gain traction. Dropping back down toward Thursday’s 1859.00 low then isn’t surprising. Not probing it is.

If fresh lows were avoided due to expiration influence, then that influence should cut both ways, printing fresh lows by Monday afternoon — Tuesday morning at the latest. That would be very helpful confirmation of the entire drop from last week’s new high having been influenced by expiration.

Isolating the selling pressure due to expiration would be bullish. Probing under 1859.00 wouldn’t necessarily be expected to recover immediately, but the premise would be that it was the decline’s later stage, not a new downleg.

Leaving unfinished business below Monday to extend higher would be also be likely to extend higher at a steep pace. The probe of fresh highs would be unlikely to last long before being rejected more substantially. Either way, the high’s retest remains likely, with the path there determining the next leg from there.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The price action described above forms a “failed Ascending Triangle” pattern, which is very bearish upon completion. We’ll look at that more closely in this weekend’s Saturday Strategy Session, starting at 9:30am ET linked from the blog’s sidebar.[/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.