Trading Plan for 3/8

If S&Ps can keep their heads so still while bonds are losing theirs… then one or the other is in for a big surprise at Friday morning’s Employment Situation report.

Pattern points… (Setups and technicals)[pay]
Thursday’s price action would have been welcome, on a scale of at least three times over. But it was paralyzed by anxiousness ahead of Friday’s Employment Situation report.

Thursday’s 3-1/2 point opening range didn’t trend, as it kept returning up to Wednesday afternoon’s high. The noon hour’s 2-point range narrowed, but still hovered at Wednesday afternoon’s high. The bias environment’s dip back to the morning’s low was retraced entirely back to the morning’s high.

Meanwhile, the long-bond fell meaningfully for its fourth consecutive session — the third one with an excessively pessimistic open. Interest rates markets are, of course, very sensitive to the Employment Situation report. And the bond market’s rubber band has been stretched to the point of either snapping back, or breaking. See a problem here?

Bonds are all but assured Friday morning to react sharply or at least with great volatility. Whichever, the stock market’s three-day narrow ranging seems like the proverbial “deer caught in the headlights,” fixated on the bright light when it had better jump out of the way to one side of the road or the other.

[/pay]What’s Next… (Outlook and opportunities)[pay]
It’s probably too late to form an Island Reversal pattern from the recent ranging above prior highs. But a gap down could still qualify. Regardless, the big question will be whether or not Friday provides a new high close for the first time in three weeks… Coverage is rolling exclusively to the Jun contract from Mar, having become the front-month at Thursday’s open. [/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.