Trading Plan for 7/12

If Bernanke was concerned with market conditions ahead of Thursday’s 30-year auction… then he did an excellent job shifting the paradigm. Careful what you ask for.

Pattern points… (Setups and technicals)[pay]
1671.00 objective met, very late, would have reacted down if met during the open or morning. No hold-long could be considered from that since the objective’s test held. Also, the pattern containing 1671.00‘s test was itself overlapping the session’s “lower prior highs,” so not clearly trending up. And the high’s RSIs were not overbought, so a downdraft would not be required to recover.

Holding short would have been suggested by closing back in the intraday range, which was avoided. But all available buying pressure was fulfilled by testing and holding the 1671.00 objective. And although the bias environment exit probed fresh session highs, the final hour’s entry and the 3:10-3:20 window did not confirm.

Much is being made of Thursday’s new high close, which is well-deserved. But May 21’s intraday high was not tested — let alone exceeded — leaving the rally as vulnerable now as it was then to reversing down sharply. We should know much within Friday’s first hour. Either the market intends to extend much higher well into next week, or “lower prior highs” in the 1648.00 area will be tested next.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This being a Friday, the morning’s bias signal should persist through the noon hour. And this being a new trend extreme, closing at a new trend high should immunize the market from peaking — not from a temporary corrective drop, but from ending the rally permanently — so long as the close is a new high.[/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.