Trading Plan for 5/7
[pay]Pattern notes.
The afternoon’s rally seems a little optimistic ahead of the widely watched event of CSCO’s earnings after the close. It paid off, so far, and probably speaks more to the magnetic attraction back to Friday’s pre-open high at ESm 1427’00. The question is what happens then, and the answer might lie in Tuesday’s open – it’s gap down will want to be filled back down to 1400’50, and that’s like an anchor around the rally’s neck.
First things, first. The low of the consolidation at Friday’s pre-open high was 1422’25, which was touched at Tuesday’s high. The actual 1427’00 high is likely to be pierced (and not just touched) so long as pullbacks now hold any brief test of 1418’50. Under 1417’50 would more likely trend down another 8 points.
Indicators and Internals.
MACD & RSI were nearly useless before Tuesday’s cash session open, then nearly indispensable during the session’s rally. S&Ps surged after the cash session close while MACD & RSI diverged negatively, but that didn’t prevent a higher high, so MACD & RSI might be useless again overnight. Internals weren’t bullish, with more than twice as much NYSE up volume as down volume producing fewer than twice as many advancing issues as decliners. This doesn’t apear to be a market under accumulation.
Wednesday’s opening setup.
A retest of Friday’s pre-open high would have a decent chance at extending higher if Wednesday’s open could quickly maintain a recovery above 1425’00. Just surging from Tuesday’s closing level is more likely to be rebuffed. Home Sales is due 30 minutes after the open, a report whose profile is high enough and whose timing is odd enough that trending already underway would be likely to retrace.[/pay]