Trading Plan for 5/27
[pay]About that close (How the prior session ended)
The 3:10-3:20 window fell to a new relative low for its period, confirming the session’s lower-end was giving way. The break was triggered under 1074.75, which sliced through its 1068.00-1069.00 target to 1064.25.
RSIs diverged positively on its retest to produce an 8-1/2 point bounce up to 1072.75. Falling back under 1067.50 starting signaling the likelihood for ticking down into the futures close. Extending under 1065.25 started arguing for holding short through the close. Futures ended at 1060.00, and early Globex trading is testing 1055.50.
Pattern points (And technical influences)
All available buying pressure had been expended during Tuesday afternoon’s rally. Its close failed to gain traction. The evening’s higher high and Wednesday’s intraday probe above Monday’s high all came during windows incapable of gaining traction. Now all of that rally above has been retraced.
A retest is required of Tuesday’s 1046.00 gap open, and of the 1036.75 “new Globex trend extreme” that preceded it. There is no particular timing or reaction to retest either. But Thursday’s morning could get there, and extend down sharply at a steepening pace.
1055.50 is Tuesday morning’s high, and it was just touched as support. Its RSIs are oversold. Any bounce there is only obligatory, and temporary. The next lower target is 1027.00-1029.00, and below there is 1007.00-1010.00. Unless Thursday’s open immediately recovers back above 1070.00, or bounces sharply again from new lows, this could get real ugly, real fast.
Bottom line (My underlying premise)
Tuesday’s recovery was too steep so long before the three-day weekend, and its buyers had failed to gain traction. Now the same illiquidity that scared away the drop’s sponsorship could scare away its saviors. The impending holiday will undermine sponsorship for trending in either direction, but wholesale selling doesn’t require sponsorship to trend.[/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.