Trading Plan for 10/21

If Friday’s final hour had been entered at fresh highs… then the balance of the session could have trended up sharply. Friday suffered no consequences for the interruption. Either the rally needs a corrective dip before extending higher, or it will try to extend higher prematurely.

Pattern points… (Setups and technicals)[pay]
New highs on a Friday tend not to be a trend’s high. Friday’s close above all prior highs now requires there to be another. An immediate downleg is possible, but it would be required to recover. Expirations are even less likely to close at a trend high.

Nevertheless, this overly optimistic stage of the rally is living on borrowed time. That can go on indefinitely, so long as rally legs are steep, and so long as pullbacks are brief, shallow or overnight..

There is room for noise above prior highs up to 1760.25 or 1774.50, without being more than the prior high’s retest. Neither yet need be tested, but the leg there would reveal whether higher hghs would be likelier than reversing back down. Reversing down immediately would have room to 1722.50 without ending the rally’s momentum.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This week’s Market Wrap essentially began 30 minutes earlier, and served in place of this weekend’s Saturday Strategy Session, which is NOT being held this weekend. Its recording is linked from both Friday’s Market Wrap and the Saturday Strategy Session blog pages.[/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.