Trading Plan for 5/25

Fourth time’s a charm? Sunday night’s drop eventually produced a bounce that was fully retraced at Monday’s open. Its low was retested a couple of times Tuesday afternoon, too. Look out below if this latest test doesn’t hold. [pay]

Pattern points… (Setups and technicals)
Several opportunities to rally were rejected Tuesday. Rejecting the open’s bias-up was the most glaring. A close second was the afternoon’s missed short-squeeze. Each produced sizable drops as a consequence. The morning’s drop was already documented, breaking back under the bias-up signal through 10:30. The afternoon failed rally was equally interesting.

A “pivotal uptrending support” had formed from connecting the 1312.25 pivotal low (the low prior to the 1311.75 actual low) with the1314.00 key low (the low following the actual low) – they’re boxed in red. The resulting green-dashed trendline allows two more tests as support, which are circled green.

The third test – circled red – isn’t so charming. It is all but assured to reverse momentum down. And since the trendline is a proxy for the pivotal low, its complete retracement becomes only a formality. It was largely retraced before the close, and then fully retraced minutes later.

Oversold RSIs at Tuesday afternoon’s low doomed any bounce to failure. In fact, a 2-1/2 point bounce to 1314.50 already fell 3 points to fresh lows. RSIs weren’t so oversold at that low, but there was no bullish reason to yet again revisit the 1312.00 area.

What’s Next… (Outlook and opportunities)
1312.00 has already produced bounces from before and after Monday’s open, then earlier Tuesday afternoon. It might produce another Wednesday, or perhaps recover from an early dip. But failing to hold its support through the open would suggest the 1299.00 target was in-play.[/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.