Trading Plan for 2/6

Friday’s post-open rally… measured 61.8% of the pre-open spike up. That’s interesting, because a sell signal’s objective would have been to retrace 61.8% of the spike up. Regardless, Friday’s post-open action was going to be a function of the spike. New sponsorship has arrived — how long will it stay?

Pattern points… (Setups and technicals)[pay]
Great jobs data. Participation dropped by an historical degree, shrinking the denominator. The numerator could only look better, regardless of the actual number of employed. So, Friday’s big story was not the details, like January created an unusual number of part-time jobs. Headline writers were only concerned with saving their own jobs in February, and avoid adding to the “8.3%.”

Falling unemployed might seem to diminish the prospects for a QE3, and for maintaining ZIRP. Then, how else to explain the market’s bullish reaction, unless it perceives the employment number to be inaccurate?

Regardless, the market is always right. And regardless of the size of Friday’s gain — both pre-open and post-open or separately — its close was not necessarily above the morning’s 1339.75 high. Not decisively. So, we cannot say decisively that Friday’s buyers gained no traction for their efforts..

Futures spiked down to settle just under the morning’s 1339.75 high. And although the cash session closed higher at 1341.25, the morning’s high was still being tested upon entering the session’s last hour — Friday’s last hour, the least relevant hour of the week. Waiting until that window before extending higher makes its sponsorship suspect, especially when it could not break above the session’s 1341.25 prior high.

Closing above 1343.00 on two consecutive sessions would put into play another rally leg targeting 1371.00. And any reaction down from there would likely be a correction to refuel buyers. (The last two paragraphs were a big part of Saturday’s Strategy Session, and its recording is linked below.)

Whatever was the positive news from the Employment Situation report, Friday’s price action fully reflects it. Mondays don’t tend to confirm a Friday breakout with a second consecutive higher confirming close, but no bad news over the weekend could allow an intraday probe higher. More positive news over the weekend on Greece may be needed to extend the breakout higher.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The recording of Saturday’s Strategy Session can be viewed by clicking here. Thanks to all attendees who participated.[/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.