Trading Plan for 5/6

If Monday’s bullish scenario was to gap up and trend higher… then was the gap down that reversed back up bearish? Possibly. Closing action left things undecided. But it also left a setup that can be decidedly bullish.

Pattern points… (Setups and technicals)[pay]
Recovering from Monday’s gap down either averted disaster, or else it was a warning shot across the rally’s bow. Testing 1861.00 during the open leaves outstanding a gap that must be filled, eventually. Meanwhile, the intraday recovery back into positive territory still could extend sharply higher if the open goes its way.

The final hour was entered above the  bias environment’s high, but never extended higher. The close was above the  bias environment’s high, too. But that doesn’t mean buyers gained traction, not without entering the bias environment above the noon hour’s high. The only way to extend higher without another downdraft is to gap up.

Gapping up above 1800.00 Monday would have trended up sharply intraday. Monday afternoon’s high touched 1800.00 and closed back under it, so not gapping up to it or through it Tuesday would essentially be bearish. Just breaking under 1873.00-1874.00 would signal momentum already reversing down.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Monday’s post-close action slid 3 points, which is a lot for that window. This tends to create a vacuum from the cash session close that helps to resume the rally the following  day. And it tends to extend down considerably otherwise. So, not rallying at Tuesday’s open could be very bearish.[/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.