Trading Plan for 5/23

Tuesday’s attempt to extend… Monday’s rally was retraced entirely. But it wasn’t retraced under a prior low. The eventual resumption of the recent decline is still a question mark…

Pattern points… (Setups and technicals)[pay]
A quick 10-point oversold bounce retraced 61.8% of Tuesday afternoon’s late drop to 1307.50. It peaked upon testing 1317.50, which was both the noon hour and afternoon bias environment’s lows. Holding that “higher prior low” until its 3:10-20 break had suggested any sellers would be weak hands.

So it is interesting that the bounce managed to close back above 1311.50-1312.50. Closing under it would have signaled the correction from Friday’s low had ended. Perhaps it has. Tuesday’s late decline had an opportunity to signal as much, but did not.

At least Tuesday afternoon’s sellers left unfinished business below. Oversold RSIs at the 1307.50 low require its retest. Extending higher first would be that much likelier to fail that much sooner. Gapping up above Tuesday afternoon’s 1323.00 high would target 1330.00-1332.00.

But retesting 1307.50 first overnight would be vulnerable to resuming the decline until 1311.50-1312.50 were recovered, and then 1315.50-1316.50. There is no requirement to resume the decline, and most of this week’s bias signals have been only grudgingly bullish.

[/pay]What’s Next… (Outlook and opportunities)[pay]
I occasionally refer to “Wreversal Wednesday,” for the day’s propensity to reverse a morning trend back in the opposite direction. That description could apply to Tuesday’s pattern. Regardless, beware of early trending Wednesday that doesn’t exceed a relevant level through a relevant timing window.[/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.