Trading Plan for 5/6
[pay]Pattern notes.
Monday’s price action was textbook “ineffectual pessimism.” The “pessimism” comes from gapping down, probing lower relative lows, and ranging exclusively in negative territory throughout the day. The “ineffectual” comes from those three pessimistic attributes failing to produce a downtrend – despite filling the gap back to Friday’s close. 
The setup awaits confirmation from a break higher that would unleash the day’s pent-up buying pressure. No break higher, no pent-up selling pressure.
For all of its ineffectuality, Monday’s drop did accomplish what Friday afternoon’s sellers could not, which was to close back under Thursday’s highs. So an opening surge Tuesday would leave behind two pessimistic endeavors, and be even more deserving of a rally to retest Friday’s pre-open high at ESm 1427’00. If the market were going to correct down before retesting Friday’s high, then it should have been obvious by now. Timing windows aside, recoveries rely upon actually recovering.
Indicators and Internals.
MACD & RSI were non-participants Monday afternoon, not indicating strength or weakness, and unfortunately not indicating an inclination towards either. Internal spreads were evenly weighted to indicate the same. Sometimes no decision is a decision. The indecisiveness is in-line with the “ineffectual pessimism” described above.
Tuesday’s opening setup.
Two weekly retail sales glimpses are due before the cash session open. Earnings include several real estate concerns (DHR, FNM, GBE, etc.) whose guidance could play on fears or reinforce confidence. A gap up above 1410’50 would be constructive to a recovery, but momentum reverses up more durably above 1415’00. The pullback meanwhile appears to have used up all the room afforded it so that almost any lower low would target 1397’00, and potentially another 5 or 10 points lower from there. The more time spent not recovering will start making the pattern likelier to probe those lower targets.[/pay]