Trading Plan for 5/4
A funny thing happened on… the way to Thursday’s short-squeeze. The last half-hour arrived, after already bouncing 5 points. In fact, RSI was diverging negatively at 3:30. That was an accident waiting to happen, but it was barely a fender-bender, which means…
Pattern points… (Setups and technicals)[pay]
Thursday’s low stopped 2 ticks short of meeting the afternoon’s 1384.00 bias-down target. That’s okay, it wasn’t a bias-down environment. Oversold 1-minute RSI helped price to firm, eventually surging to 1389.50.
That 10-minute surge closely resembled a short-squeeze. A short-squeeze would not have been unusual. Surely, a short-squeeze was widely anticipated, following the big intraday drop. But the squeeze began prematurely, so maybe it ended prematurely, too.
In fact, having already gained 5 points of the low before the last half-hour even began, a short-squeeze became less likely. Overbought 1-minute RSI at its 1389.50 high didn’t help, and then RSI diverged negatively.
You might think after so much build-up to this pattern, that I am about to report how successful it was. Actually, the setup’s 1388.00 sell signal extended only 6 ticks through the close. Futures eventually extended that to 3 points at 1385.00, but that’s irrelevant.
Much more interesting is that last-minute sentiment ahead of Friday’s Employment Situation report was optimistic. The momentary dip to only 1384.50, the premature squeeze, and the late shallow pullback. A favorable reaction Friday morning would still be vulnerable to reversing down.
[/pay]What’s Next… (Outlook and opportunities)[pay]
This being a Friday, the morning’s bias signal is likely to persist through the noon hour. And having closed Thursday back under Apr 4-5’s lows, almost any new rally effort requires rejecting Thursday’s drop as quickly as possible. Not rejecting it could point down sharply into the weekend.[/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.