Trading Plan for 5/20

[pay]About that close (How the prior session ended)
Wednesday afternoon’s lows tested 1107.00-1108.00. Its break would have presaged a disastrous downleg capable of probing new session lows today. Whew. The afternoon’s high was retested, 10-11 points higher at 1118.25. So, it seemed like a big deal, but it wasn’t.

In fact, the cash session close dropped back to 1112.75, and futures fell 3 points further to 1109.75. Even the last half-hour’s 17-point round trip maintained the afternoon’s earlier characterization as “ranging around 1113.00.”

Pattern points (And technical influences)
The close left the market dangerously close to the afternoon’s 1107.00-1108.00 low. At least the session ended in decline instead of bouncing. Otherwise, gapping down under the afternoon’s low would have triggered a session-long decline.

Being only 3 points under the futures close, gapping down under 1107.00-1108.00 should be simple. So simple, that not gapping down under it would be bullish. Of course, the market rarely takes the simple route.

For example, the gap back up to Wednesday’s 1112.75 cash session close will try to attract price higher. In fact, a bounce at Wednesday’s Globex open has already probed 1112.75 by 3 points up to 1115.75.

Recovering 1116.00 might extend higher to probe Wednesday morning’s 1122.75 high. But reversing down to break under 1107.00-1108.00 would target a retest of Wednesday’s oversold RSIs at its 1098.75 low, presumably also the outstanding objective at 1096.00.

Bottom line (My underlying premise)
Thursdays can behave like a Friday morning during a decline. Excessive fear of a sell-off can shift selling pressure forward. Its initial effect can be self-fulfilling by exacerbating the decline. But it can also push price down to unsustainable levels that suddenly become more attractive to buy. A rally Thursday would deny the market this opportunity to form a sustainable bottom. [/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.