Trading Plan for 5/6

If Friday’s breakout had happened on any other day… then the following session would be likelier to confirm it with a second consecutive higher close. Monday’s are less likely to follow-through.

Pattern points… (Setups and technicals)[pay]
Extending higher without delay Monday is already unlikely for the same reason that Friday morning’s high was likely to hold: its sponsorship either was borrowing buying pressure from the afternoon, or else chasing the pre-open surge.

But the rally is also unlikely to extend higher immediately because Friday was a breakout. And Friday breakouts tend not to be confirmed by a second consecutive higher close on Monday. (Why? See the paragraph above.) Probing fresh highs Monday while retesting Friday’s high is possible, but the probe would likely reverse back down.

A pullback would be likely to recover — at least, back into Monday’s range. That is because gapping open above prior highs would need at some point be retested after probing “lower prior highs” back under 1594.25. Also, a new trend high close Fridays is very unlikely to be THE trend high close.

Pulling back to 1586.50-1588.00 Monday, or down to 1574.00 into the middle of the week, would still be likely to recover back to 1606.50-1609.25.

[/pay]What’s Next… (Outlook and opportunities)[pay]
A second consecutive higher close Monday would nonetheless confirm Friday’s breakout. In any case, gapping down Monday would still be vulnerable to bouncing back into Friday’s range before extending back under prior highs. Gapping up would be likely to probe above Friday’s high before failing.[/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.