Trading Plan for 2/11

If Friday’s pop-and-stop “breakout” was held back by unusual illiquidity… then Monday’s open should compensate for the delay by immediately extending higher aggressively. No compensation, no delay. And the rally had better find some other reason to justify its awkward pause.

Pattern points… (Setups and technicals)[pay]
The rally’s 1503.00 target was met two Tuesday’s ago. We always knew there was room for noise around it up to 1512.75. It was finally tested Friday, the reward to buyers for having absorbed several sell-offs in the prior two sessions.

Testing 1512.75 proved to be the worst of two worlds for trying to extend the rally’s momentum into next week. Despite testing it almost immediately Friday morning, it held through the close (at it, actually). The other “worst” was that 1512.75 served as the mid-point to post-open narrow ranging — no intraday dips refueled buyers. Closing above it would have signaled another rally leg underway.

The new trend extreme close on a Friday does threaten to further entrench the rally, and undermine any pullback prior to a fresh high close. But that is achievement is undermined by the last half-hour’s dip touching the 1511.00 “lower prior high,” whose reaction only remained within the range.

Noise range and trend extreme aside, Friday’s new high close is a breakout, which a second consecutive higher close would confirm. Unfortunately, Mondays rarely confirm Friday breakouts.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Perhaps Friday’s opening surge went flat for the day because of the session’s unusual illiquidity caused by the East Coast’s impending excess liquidity. That bullish pattern would demand compensating for the delay Monday by immediately extending higher aggressively. Any shallower strength, or drop, would mean there was no bullish reason for a delay, so there really wasn’t a delay. If the breakout were confirmed, then 1512.75‘s noise range would be breaking to put into play 1533.00 and potentially 1577.00. [/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.