Trading Plan for 5/21

If Tuesday’s open didn’t gap up… then a retest of last Thursday’s lows would be likely. The open was 6 points short of its gap up requirement. The afternoon’s low was 6 points short of retesting last week’s low. Underachiever, at both ends.

Pattern points… (Setups and technicals)[pay]
Closing under 1874.00-1875.00 essentially proves another rally leg won’t develop prior to last week’s low. That was an option Tuesday morning, had its test launched a rally then. An afternoon short-squeeze could have reinstated its potential. But Tuesday afternoon’s bounce after the bias environment exit and final hour entry reflect weak-handed buyers.

Dipping back down into the close could have reinstated the decline by triggering a hold-short. But the 1868.50 trigger wasn’t even touched until at the close, and then it only held. So, gapping down anyway would be likely to rally back into positive territory through the open, instead of extending down.

Bounces should hold any test of 1874.00-1875.00 to be only corrective on the way to testing Thursday’s low. Gapping up Wednesday above 1874.00-1875.00 or opening above it could negate the drop’s near-term momentum, perhaps even reinstate the high’s retest. Otherwise, 1859.00 and presumably 1854.00 are in-play.

[/pay]What’s Next… (Outlook and opportunities)[pay]
“Wreversal Wednesday” got its name for being prone to reverse initial trending into a completely opposite direction. This irrelevant to the preceding trend, so trending either up or down would be vulnerable to reversing more substantially in the opposite 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.