Trading Plan for 5/6
Going into overtime… In a trend, the third consecutive lower open tends to expend the trend’s sponsorship. That led to posturing for a bullish morning. But the afternoon’s fall to new lows suggests new sponsorship has arrived.
[pay]Pattern points… (Setups and technicals)
The 3:10-3:20 window probed the morning’s 1332.00 low, and also recovered it. The particular timing of this particular action tends often warns that the next low will produce a sizable bounce.
In fact, a fresh low down to 1325.25 was recovered up to 1332.50 into the cash session close. The recovery extended up to 1335.75 into the futures close. And it touched 1337.25 soon after the close. Sizable? That’s a 61.8% retracement back to session highs.
There’s room up to 1339.75 before a bigger rally would start gaining traction. So, this bounce off of Thursday’s 1325.25 low isn’t even close to being “sizable,” which the 3:10-3:20 signal suggests.
And much of the bounce hasn’t really happened – 1332.00 was still being tested at the cash session close. Its clear recovery would have made the bounce’s potential clearer, too.
Meanwhile, oversold RSIs at the 1325.25 low require its eventual retest. They were higher lows, which facilitated the recovery. But they were oversold, nonetheless.
What’s Next… (Outlook and opportunities)
Greeting Friday morning’s Employment Situation report from above the 1339.50 bias-up target would be likelier to absorb any unfavorable reaction. Being a Friday, a morning’s bias-up tends to persist through the noon hour, which could marginalize sellers for the day, or until 1346.00 were tested.
But any unfavorable reaction from any lower would be difficult to absorb. New trend lows into Friday morning tend either to extend down sharply for the morning as extra selling tries to avoid the weekend’s illiquidity. Bouncing from new trend lows on Friday morning only delays the inevitable.[/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.