Trading Plan for 5/23

If Wednesday morning’s rally were not so excessive… then would its reaction down have been more subdued? Sure. Wednesday’s reaction down. But the reaction down — when it comes, as this might be — will have a long way to react down. More than any single session could produce.

Pattern points… (Setups and technicals)[pay]
All the makings of a top and reversal, right? Mostly. Some of the bigger points are:

1671.25 target that was triggered above 1654.50 met and held through the close? Twice, in two consecutive sessions, not even counting a third that came within 3 ticks.

Rally above 1627.25 consolidation qualifies as a “blow-off bubble?” Even before Wednesday’s stunning intraday swing.

No unfinished business left outstanding above? Overbought RSIs at Wednesday morning’s 1685.75 high weren’t fully retested, but the structure containing it was neutralized up to its 1681.00-1682.00 target.

Unfinished business below left outstanding? Oversold RSIs at Wednesday’s 1646.50 low require a retest. It could be neutralized overnight.
As for breaking under every relevant low tested intraday? Well… 1648.50 and 1646.00 that contained last Thursday afternoon’s dive were retested Wednesday. They were still being tested at the close. Their eventual break is likely, but could initially produce a bounce.

The same session that produces a new trend extreme is precluded from triggering a trend reversal signal. Stay tuned…
[/pay]What’s Next… (Outlook and opportunities)[pay]
A lot of selling pressure has been expended, but so far only to retrace weak-handed buying pressure. That doesn’t better enable extending down, at least not immediately.[/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.