Trading Plan for 5/6
[pay]Pattern notes.
Monday’s alleged breakout would have been confirmed by a higher close Tuesday. Instead, the session was spent almost exclusively in negative territory, under Monday’s highs. Much if not all of the intraday loss was recovered at the close. Ineffectual pessimism that is prone to gap up, or chipping away at support to clear a path down?
Ineffectual pessimism identifies when sellers, seemingly in control, expend their energy without getting anything in return. No break under support, no trend reversal, no traction, no more energy. They do get one thing – vulnerability. It can be bullish if exploited immediately by gapping up above prior highs (905’00). The recovery isn’t necessarily durable and there is no particular ramification to holding up. But ineffectual pessimism at trend highs is much less bullish than at trend lows.
Ineffectual pessimism isn’t so ineffectual at all if followed immediately by gapping under the ineffectual pessimism session’s lows (894’00). Each of Tuesday’s lows tested one of Monday’s prior highs, some repeatedly, chipping away at its available support. Tuesday’s low also happens to be its afternoon low, and it printed before the last half-hour. Since the session’s last trending was up, gapping under 894’00 would also trigger a session-long decline.
Tuesday’s close left no unfinished business above. There was room up to 904’00, which was recovered after the cash session close. An overnight probe above Monday’s prior highs wouldn’t necessarily be a “new Globex trend extreme” requiring intraday retest, especially if retraced by the cash session open. Firming further can’t be ruled out since no sell signal has triggered, but clearly it can’t be relied upon either.
Indicators and Internals.
Tuesday afternoon’s RSIs weren’t particularly pessimistic. Selling pressure wasn’t heavy, so the last half-hour’s recovery didn’t have much opposition to overcome. RSIs did diverge negatively into the cash session’s last high.
Wednesday’s opportunities.
A couple of looks at employment are released pre-open, but there isn’t much other high-profile news scheduled. A gap up above 905’00 prior highs would get a benefit of the doubt for extending higher depending upon the overnight pattern that preceded it. Gapping down to Tuesday’s 894’00 lows would get a bigger benefit of the doubt for extending down so long as bounces held 896’00, and lower lows were maintained through the opening sequence.[/pay]