Trading Plan for 5/22
[pay]Pattern notes.
Wednesday’s drop was the first to close back under a prior reaction low. That’s a big deal to me. S&Ps have been swatted down several times since probing above February’s prior highs. In all prior instances, even when intraday dips have probed lower lows, buyers prevailed by the close or in some other timely fashion. That’s going to be difficult at this time following a single-session 20-point drop.
Regardless, prior dips weren’t attempted with the same vigor seen Wednesday. The damage is done, and a trend change is being signaled. Timing might be another matter, since liquidity ahead of the holiday weekend will soon start evaporating. Sponsorship for trending in either direction will become increasingly difficult, and volatility might all but disappear after Thursday afternoon.
Indicators and Internals.
MACD & RSI diverged positively into Wednesday’s last-minute probes of new lows. The close back above prior lows helped to rob sellers of their traction. Between those two lows there is an interim high, which an overnight rally is trying to exceed. In fact, in the past 2-1/2 hours S&Ps have momentarily probed Wednesday’s last relative high three times. And on each attempt both MACD & RSI have failed to improve. So although sellers lost traction at the low, buyers have not regained it at current highs.
Thursday’s opening setup.
S&Ps are indicated to gap up at this moment, four hours prior to Thursday’s cash session open. This would leave outstanding a gap back to Wednesday’s close. The gap’s magnetic attraction will inhibit the morning’s rally efforts, if there even is one. Jobless Claims at 8:30 might affect those chances. If the decline’s resumption can be avoided through the morning’s 10:15 timing window, it will likely be avoided until next week.[/pay]