Trading Plan for 5/26

What a difference 3 minutes can make… Wednesday’s late break higher came a little too late to be the product of durable sponsorship. Its complete retracement wasn’t surprising, but the swiftness was.[pay]

Pattern points… (Setups and technicals)
Wednesday’s midday consolidation failed to probe fresh afternoon highs into the session’s last hour. That didn’t prevent a 4-1/2 point surge up to 1324.50 from starting just 3 minutes later. But launching too late kept the surge from holding. And the close slid 8-1/2 points to close at 1316.00.

Overbought RSIs at the high made the pattern vulnerable to dropping. The technicals setup should also make the drop temporary – at least to retest the 1324.50 high. Its retest would be moot if Thursday’s open extends down under 1316.50, Wednesday afternoon’s last relative low which was still being tested at the close.

Meanwhile, the three-day weekend indicator expects sideways ranging through Friday morning. This is because there was no break above or below the 1312.00-1320.00 range that greeted Wednesday’s open. Wednesday probed both ends before closing back within the range.

What’s Next… (Outlook and opportunities)
Thursday’s open could still signal trending by maintaining a gap above or below the 1312.00-1320.00 range. In other words, do what Wednesday didn’t, without hesitation.

Otherwise, trending could still be attempted Thursday and Friday – and probably will be. It’s just unlikely to gain traction from probing beyond Wednesday’s 1302.25-1324.50 range. For example, an early retest of overbought RSIs at Wednesday’s 1324.50 high would likely reverse down to the range’s lower-end, if not to Wednesday’s overnight lows. [/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.