Trading Plan for 5/6

[pay]About that close (How the prior session ended)
Wednesday’s last hour began after a drop had neutralized the attraction at 1160.75. An RSI setup had predicted a short-squeeze. Price did firm 7 points from 1157.00 to 1164.00. But the action was not squeeze-like. Tuesday’s lows held as resistance through Wednesday’s close, and Wednesday morning’s low held as support, creating “ineffectual pessimism.” Buyers failed to gain traction, and sellers conserved their energy.

Pattern points (And technical influences)
To paraphrase Woody Allen who was twisting Rudyard Kipling, “If you can keep your head when all about you are losing theirs, then you probably need to check your voice mail.”

Wednesday morning’s television images of Greece riots coincided with S&Ps testing the long outstanding 1156.50 objective. Extreme pessimism is bullish from a contrarian perspective. Coinciding with a relevant price makes it extremely actionable. Recovering 1159.00-1161.00 targeted a 6-9 point rally to 1165.00-1168.00 that only momentarily reached 1173.00.

A lot of buying pressure was expended, only to fill the gap(s) back to Tuesday’s close(s). Buyers gained no traction throughout the morning, and the open’s gap down at 1160.75 needed to be retested. Its attraction was neutralized, leaving two others below: Oversold RSIs at the low, and the last 2 ticks of the 1154.25-1156.50 target range.

Neither one requires being retested. But they do remain vulnerable because buyers didn’t gain traction Wednesday. Their retest could either resume the decline, or else absorb sellers and launch another rally attempt.

Bottom line (My underlying premise)
The alternative to testing the lows is for Thursday’s open to gap up at least 10-11 points and to recover the 1175.00 prior highs. Entirely possible, although the open should be testing 1175.00 from above to be credible. Otherwise, retesting 1154.25-1156.50 could launch a sizable corrective rally through Friday’s Employment Situation report, or else extend the current decline to1146.00 and 1134.00. [/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.