Trading Plan for 5/22

If Tuesday’s fresh high were not distribution… then the close should not have been back under prior highs. Rally early, rally often, or else start showing signs of reversing down.

Pattern points… (Setups and technicals)[pay]
Monday afternoon’s 1668.75 bias-up signal triggered cleanly at 1:20. It was not invalidated at 2:30. Despite piercing it momentarily, its support held through 3:00. The bias-up was valid, and its 1673.75 bias-up target becomes unfinished business above.

Does it matter?

The bias-up target was met within 3 ticks, which suffices for fulfilling it. At least, reversing trend downward would leave no “unfinished business above” — especially since oversold RSIs and ultimate targets were all tested by Tuesday’s high.

So, it’s really just a nuance.

Tuesday’s close did dip down, away from the bias-up target and back under the bias-up signal. But it still didn’t produce a negative close. That saves the market from a sell signal. It’s still vulnerable to reversing down — again, no unfinished business above, closing under relevant levels — but we’re still one step away from a sell signal.

That can be a big step.

Being so close to signaling that momentum is reversing down, and yet NOT signaling momentum reversing down — rallying instead — could be very bullish. This is still a major inflection point around 1671.25. And the resolution is nearing.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Berananke’s testimony and FOMC Minutes will keep the recent QExit rope-a-dope in the spotlight.[/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.