Trading Plan for 11/5

Making up for lost time… This market has gone from not wanting to trend, to not wanting to stand still. That’s not the same as wanting to rally. All this pattern assures is that volatility will be extreme.[pay]

Pattern points… (Setups and technicals)
Gapping up sharply to new highs is by definition optimistic. But Thursday’s gap up to new highs was not excessively optimistic. Each relevant timing window either held a test of support or a break above resistance. This helped to maintain confidence in the intraday outlook for 1218.75 or 1220.25.

The last-hour breakout to a new high indicated that its sponsorship was squeezing shorts. Shorts reflect pessimism. And when shorts are so active at new highs, it is bullish from a contrarian perspective. But the bullishness might only serve to absorb a downleg so that it can recover to test Thursday’s high.

Bullishness is context. It does not equate to price measurements that identify next higher targets. And a bullish context does not necessarily point higher without delay. Extending immediately to higher highs is even less assured since Thursday’s high met and held an important target.

What’s Next… (Outlook and opportunities)
Speaking of which, Thursday’s last-minute high at the 1218.75 target fulfilled its pattern’s buying pressure. And it comes just before Friday morning’s Employment Situation report. Recovering 1220.25 through any relevant timing window would point higher into the afternoon. Any meaningful intraday drop must first break under 1212.50.[/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.