Trading Plan for 5/28
[pay]Pattern notes.
Ever since Tuesday’s open, sellers couldn’t seem to get started. Wednesday afternoon there was no stopping them. The overnight high was likely to be retested, but Wednesday’s two attacks on it both refused. The afternoon’s no-bias signal triggered, but S&Ps dived 19-points anyway.
The overnight high’s retest wasn’t required, just likely. And the drop started 10 minutes after missing the bias-down signal. Wednesday’s selling came from nowhere, but its arrival was expected. In fact, Tuesday’s mid-day running correction had already signaled that optimism was unsustainable. And the bounce potential to 908’00-910’00 was being tested through every relevant timing window.
Also, a break under 880’00 has been required since last Thursday’s test of the prior week’s lows. Not a probe under 880’00, but a break. It should be quite a break, since Tuesday’s interim bounce was quite a bounce. It refueled sellers, as did last week’s bounce up to 923’00.
Wednesday’s aggressive selling was sudden and relentless, and did I mention also aggressive? A drop is not a buy signal, but not falling further at Thursday’s open would be bullish for a near-term bounce. The higher, the better, to retrace Wednesday’s no-bias decline. But the selling is so long delayed and so well fueled that its immediate resumption Thursday would be credible for extending down sharply intraday.
Indicators and Internals.
RSIs were simultaneously oversold while Wednesday’s late low was printing. Overnight action has already fallen further, but it hasn’t tried to diverge positively. A bounce from here would be likely to fail, but no bounce is required.
Thursday’s opportunities.
A corrective bounce overnight or Thursday morning would target either 898’00 or 904’00. I would start getting bullish if that extended higher to also recover 907’00, but a new downleg would be expected meanwhile. No bounce is required, and an immediate break or gap down maintained under 884’50 might not find any sort of bounce before 867’00. Several high-profile econ reports are due.[/pay]