Trading Plan for 2/4

That’s a switch. Often, afternoons prior to Employment Situation reports tend to become subdued. “Paralyzed by anxiousness,” I always say. Thursday morning’s action was volatile, dropping sharply, and then rallying. But three hours of very, very narrow ranging rallied further until the final minutes.  [pay]

Pattern points… (Setups and technicals)
Thursday’s new high close was below prior highs, which means buyers didn’t gain traction for their efforts. It’s a breakout, but it needs confirmation from a second consecutive higher close Friday. That would put into play 1324.00.

The minimum objective of Thursday’s recovery was to retest Wednesday’s 1304.25 high. There was potential to probe Tuesday’s 1306.00 high. Tuesday’s 1305.50 pivotal high was touched. Touching the pivotal high, the high prior to the actual high, all but requires piercing the actual high.

The path to piercing the actual high isn’t predictable. It is predictive. Extending higher without interruption is likelier to fail quickly. A bigger dip first – not a gap down – would refuel buyers to help extend the rally

Thursday’s dip under last week’s highs threatened to start a decline. Its recovery was bullish, and closing positive more so. All that is missing is confirmation from a second consecutive higher close Friday. That’s going to be difficult following a new high close that is below prior intraday highs.
What’s Next… (Outlook and opportunities)
Closing higher Friday would confirm the breakout. Extending higher without interruption would be less likely to maintain the gain. So, the optimal bullish setup would recover from another dip to close positive.

Rejecting a fresh high like last Friday is unlikely, simply because that happened last Friday. Simply trading down through the open might be only temporary and bounce off of 1300.00. But gapping down or spiking under Thursday afternoon’s 1298.00 low would trigger a session-long decline that repeats the effort of Thursday’s opening drop.[/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.