Trading Plan for 5/21

[pay]Pattern notes.
Tuesday’s late-afternoon bounce from ESm 1409’00 up to 1415’25 and back again formed a Double Bottom. A short-squeeze into and out of the cash session close fulfilled the afternoon’s bounce potential up to 1418’00, and now a higher high has touched 1420’00. I still consider this to be a correction from which the decline will resume.

Recall yesterday’s last post and comments in the charting room: I described the optimism reflected by Tuesday’s lows forming just above last Wednesday’s close in the 1407’00-1408’00 area. A recovery from probing under the prior low would have been impressive, while the actual bounce only speaks of impatient buyers. At this moment Wednesday’s open is indicated to gap up optimistically 6 points more instead of gaining traction by advancing tick by tick.

The gap up would test last Wednesday’s ~1421’50 prior high, which is pretty big resistance to attack having expended so much buying energy. Any higher on a closing basis would question again whether the bearish scenario was in-play. Otherwise, it is, and back under 1411’75 simply points down.

Indicators and Internals.
There wasn’t much special about MACD & RSI during Tuesday afternoon’s Double Bottom, so the overnight gain isn’t fulfilling any prophecy. Technicals deteriorated somewhat after touching 1420’00 but nothing at this moment to signal a downturn. Internal spreads did obligate Wednesday’s market to reward Wednesday’s buyers for their relative productivity, which any gap up would neutralize immediately.

Wednesday’s opening setup.
Today’s pre-open report is limited to the weekly MBA Purchase Apps. This afternoon at 2:00 ET is FOMC Minutes, which is very reliable at stirring things up. Price action 1-2 hours before the report is often paralyzed from anxousness. Perhaps more important is that volume should start tapering off Thursday afternoon before nearly evaporating Friday. That means Wednesday is the last full day of liquidity before the three-day weekend. If buyers have any chance at retaking control before a bigger decline, they probably need to do it before Thursday begins.[/pay]