Trading Plan for 5/9
[pay]Pattern notes.
Narrow ranges come and go. Instead of covering ground, the only spoils of most go-nowhere ranging is a session or two, and our attention. There is some meaning in almost every session, less so when less ground is covered. But within the context of Wednesday’s session-long decline, Thursday’s ranging was quite bearish indeed.
The bullish scenario’s task Thursday was to reject the clear message delivered Wednesday. That it came wrapped in a session-long decline was only a distraction – producing an oversold situation that would slow the descent.
The message itself was that significant support had been broken on a closing basis. An example of that support is last Friday’s low, which rose to be so significant because Wednesday’s high had touched Friday’s high.
Thursday afternoon’s rally attempt added insult to injury. First by neutralizing the magnetic attraction of overnight highs, and then by rejecting the rally with a close back under the session’s prior highs. The latter statement was nearly made untrue by a bounce into the cash session close, but it stopped just short of success. S&P futures then plunged to lower lows into and out of the Globex open, now threatening to resume Wednesday’s decline into the weekend.
Indicators and Internals.
Several buy setups were rejected on the way down to Thursday’s lows. The early-afternoon rally attempt settled the discrepancy, allowing MACD & RSI to confirm the late-afternoon drop. 13% more NYSE up volume than down volume produced 40% more advancing issues than decliners on moderately heavy volume, which would normally obligate Friday’s session to reward Thursday’s buyers for their relative productivity. That obligation is always rendered moot by a gap under session lows (and verse-visa when the obligation is reversed), and that is currently indicated overnight.
Friday’s opening setup.
Another support broken Wednesday was the gap down to Tuesday’s open. The next evidence of sellers taking control would be a close under last Thursday’s 1384’00 low. That’s probably the most important, since the two prior broken supports were created after months-long resistance had been broken. The level is being probed now by 2 points, creating a
“new Globex trend extreme” that will require being retested (or exceeded) during regular trading hours – not necessarily today, but probably since MACD & RSI are confirming.
This being a Friday, holding an early test of support would likely immunize the balance of the session from selling pressure, if not also invite a rally. But not holding a probe of new lows after so much distribution and chart damage – with two days of illiquidity just hours away – would be vulnerable to a session-long decline on large-scale selling.[/pay]