Trading Plan for 5/8

[pay]Pattern notes.
Has the bar tab has come due for the past week’s weak buying binge? Like a clever challenge among the bar’s patrons, buyers employed a lot of tactics to maintain the rally’s momentum, but there was really nothing there. Quick surges, shallow consolidations and brief dips – all designed to avoid interest from sellers. If we are known by our enemies, then these buyers are weak because they never attracted real opposition from sellers.

Eventually someone must pay the bill. Buyers haven’t been accumulating, only shifting money around from pocket to pocket, so the bartender will settle up himself. His method includes some heavy lifting and impolite tossing, then a not-so-gentle stretch of flying from indoors to out. Don’t ask. Along the way, 75 points worth of gains traversed in six days can be undone in six hours.

Thursday’s dramatic reversal from new recovery highs to sharply lower lows might yet prove to be only constructive pessimism ahead of Thursday evening’s stress test results and Friday morning’s Employment Situation report. I suspect not because this sell-off’s character differed from the past week’s refueling tactics, and damaged the charts. The recent optimism may have been excessive, or it may have been well-place. Either way, Friday’s price action should be entertaining, rich and informative.

Indicators and Internals.
Several consecutive positive divergences among 1-minute indicators weren’t productive, along with two 3-minute divergences. The last half-hour’s momentary probe of a new low was compared to a prior low whose indicators weren’t oversold. And despite bouncing somewhat into the close, there was no reflection of increased buying pressure.

Friday’s opportunities.
The long-awaited bank stress test results have been leaked too much for there to be a real reaction, unless the leaks prove to be wrong. The reaction to moving this news item into history will be interesting, but overnight volatility and trending might be difficult ahead of the morning’s Employment Situation report. Trending after it might be difficult to stop. Being a Friday, the morning’s bias signal is likely to influence price action through the noon hour’s exit.[/pay]