Trading Plan for 5/26

[pay]About that close (How the prior session ended)
Tuesday afternoon’s rally started from within 1 tick of the afternoon’s 1048.75 bias-down signal. Its sudden appearance, steep slope and substantial gains characterized it as a short-squeeze. The surge hesitated upon filling the gap back to Monday’s close, and didn’t actually probe its range up to 1074.75 until Tuesday’s futures close.

Pattern points (And technical influences)
Although the recovery was breathtaking in its degree, it was sponsored by weak hands. That’s who buys oversold RSIs like those at Tuesday’s 1036.75 pre-open low. Oversold RSIs  attract bottom fishers, knife catchers, dead cat bouncers. Waiting until Tuesday’s final minutes to finally probe Monday’s low means its buyers didn’t gain any traction for their effort. Weak hands.

Look out below if Wednesday’s open isn’t gaining traction above Monday’s high. Tuesday’s opening 1046.00 gap down was beyond the prior range, so it requires a retest. So does the 1036.75 overnight low, which is a “new Globex trend extreme.” With three more days remaining until the three-day weekend’s illiquidity, Tuesday’s rally came a little early.

Extending the recovery overnight could delay the decline’s resumption until after the holiday.  Since Tuesday’s close attacked the lower-end of Monday’s 1077.00-1088.75 range, gapping up above its upper-end Wednesday would likely marginalize sellers through the weekend. It helps if Wednesday’s open is dipping down to 1088.75 from higher highs overnight.

Bottom line (My underlying premise)
It’s too soon to pronounce Tuesday’s recovery as being done. Early Globex trading Tuesday night added almost 11 points to attack 1085.00. Success would next target 1106.00-1110.00. Failure would extend the current downleg targeting 1007.00-1010.00, potentially this week. [/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.