Trading Plan for 10/7

If a rally is fueled by squeezing shorts… then it’s a bit concerning that Friday afternoon didn’t. Usually the weekend’s impending illiquidity is an excellent catalyst. Perhaps it’s not yet that big of a concern. But not yet rallying at Monday’s open…

Pattern points… (Setups and technicals)[pay]
The breakout underway Thursday afternoon above 1677.00 was finally fulfilled Friday. The Capitol shooting triggered a detour to 1668.25 that half the night was spent testing as support. The open quickly resumed the original position, and then exceeded it to fulfill the 1680.75 bias-up target.

Whether there was more to Thursday’s original story, or perhaps the delay deserved compensation, Friday afternoon extended higher to 1686.00. Probing fresh highs wasn’t difficult since noon hour price action had already signaled that sellers were marginalized for the day.

But despite marginalizing sellers, and despite probing fresh highs, the entire afternoon really only ranged sideways above 1681.50 support. And that’s after a morning rally into the weekend’s illiquidity, not to mention one day off a retest of recent lows with no unfinished business below. That template is otherwise very vulnerable to a short-squeeze.

The rally doesn’t have much more room above — if any — without having more shorts to squeeze. Nevertheless, exiting the morning’s bias environment above Friday’s highs should next retest 1701.00. Otherwise, entering the noon hour back in negative territory, or just trending down through the open, could already resume the decline.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Don’t forget that there is no Saturday Strategy Session this weekend. We did have an expanded Market Wrap after Friday’s close to cover the bigger picture, and its recording is linked in the blog’s sidebar.[/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.