Trading Plan for 5/7
[pay]About that close (How the prior session ended)
Thursday’s last hour firmed. What’s so unusual about that? Of course, it’s not often that a 33-point range from 1103.50 to 1136.00 can qualify as firming. But the previous half-hour had bounced 63 points from 1056.00. And that was after being down 108 points from Wednesday’s close. Regardless, Thursday’s last hour firmed.
Pattern points (And technical influences)
Mainstream media is helping to keep optimism alive. By scapegoating so-called “fat finger” trades in PG and ACN, or errors made at CITI, there’s still some doubt out about whether the 14-month bounce has ended. The widely-watched Dow Industrial average was down a thousand points intraday, and there’s still optimism.
This was not a crash – not, yet. The low’s RSIs were oversold, making its retest likely since that doesn’t attract durable buyers. More important than the low’s retest is how a probe of 1194.00 1094.00 and 1184.00 1084.00 is resolved. Recovering on a closing basis would promote a corrective bounce before resuming the decline. Failing to hold 1194.00 1094.00, or also 1184.00 1084.00, would put the lie to whether a couple of fat fingers are to blame.
Thursday’s late bounce to 1136.00 reversed down appropriately. But it also closed under 1127.50, which was low enough to predispose the market to react unfavorably to Friday’s news. The dip has already extended down to 1115.25, and under 1110.00-1111.00 would further predispose the market to react unfavorably. A negative reaction would likely extend, and a positive reaction would likely fail.
Bottom line (My underlying premise)
So, just what is Friday’s news? It was supposed to be the Employment Situation report. Not that its data would have affected policy, but it would have been the focus. That’s normally the econ calendar’s focus on the month’s first Friday. The calendar may be more focused on this simply being a Friday, with two days of illiquidity, rioting, and who know what, just hours away. [/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.