Trading plan for May 12, 2015

150511-ES-dailyMonday we were looking for some follow-through from the previous week’s rally. It didn’t happen. The ES spent almost the entire session in the red despite a rate cut in China that might have moved the market up a little. The ES lost momentum again.

Today it looks like US market is waiting for news about Greece and the continuing credit crisis, but we think there may be other factors involved.

The sudden rally in overnight trading last Thursday trapped many Bears, but the market established a balance point around 2085. The even faster rally the following day (Friday) left a big gap from 2084 to 2102.50 and destroyed the fragile balance set the previous day.

The starting point is close to the 40-day moving average around the 2087.50 level. The Bears will be looking for the market to return to that level to give them a chance to escape, and that might be the maximum retracement for today and tomorrow.

Today Greece is scheduled to make a substantial debt payment. It there is a default the market could suddenly begin to move very quickly, and there could be wide price swings. Absent a default the movement is likely to be a slow grind downward, perhaps with a bounce near the end of the day or tomorrow.

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