Trading Plan for 7/2

If Wednesday closes higher… then we could be in for another six more days of pretending it’s not summer. You know, that whole “sell in May and go away” maxim. It’s already July, and that strategy couldn’t be less appropriate. If Wednesday doesn’t close down, aggressively, the rally may yet extend anyway.

Pattern points… (Setups and technicals)[pay]
Tuesday’s buyers gained no traction. Perhaps that seems odd, considering the substantial rally to sharply higher highs. But those highs fully rewarded buyers for their efforts. Otherwise, new buyers would have pushed price higher at appropriate afternoon timing windows. Which they did not.

The rally was relentless, but it attracted no new sponsorship. The entire post-open upleg never violated a pullback limit that needed reinstatement. That’s a lot of buying pressure to expend without refueling — not just in terms of price, but in terms of timing windows.

In the same vein, Tuesday afternoon’s dip is interesting. The relatively controlled pullback into the bias environment’s exit reflected essentially longs taking profits. There was no sudden short-squeeze surge, which would have meant the rally had climbed a proverbial Wall of Worry. Such pessimism would be bullish from a contrarian perspective.

So, the only way to extend the rally immediately Wednesday is to gap up above Tuesday’s high. It’s possible. The high’s retest is likely, but not required since its overbought RSIs were waning by the time of its most recent bar. Also possible is just to test Tuesday’s high, and then reverse down.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Econ reports have begun stacking up ahead of the three-day holiday weekend. Wednesday brings the ADP report, which helps to fine-tune the market’s likely reaction to Thursday’s Employment Situation report.[/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.