Trading Plan for 7/5

If Wednesday’s open were up instead of down… then the balance of the session could have been spent trapping shorts. Instead, shorts were squeezed. A negative reaction to Friday’s Employment Situation report could drop dramatically.

Pattern points… (Setups and technicals)[pay]
Monday afternoon’s dive undermined the morning’s buyers, but it was not deep enough to be the product of strong-handed sellers. Sellers were marginalized through the holiday. Tuesday’s afternoon and overnight drop therefore was unlikely to extend down.

Exiting Tuesday’s opening 15 minutes of volatility at 9:45 back above 1598.00-1600.00 also undermined the overnight momentum. The setup was duplicated, and a combined test of both bias-down parameters was nearly rejected by 10:15. Nonetheless, sellers were marginalized.

Marginalized sellers taking price back down to prior lows would have made a very bullish reaction very likely to Friday morning’s Employment Situation report. Oh, well.

Instead, the balance of Wednesday’s truncated session already rallied. Unfinished business above at 1611.25 was neutralized by retracing Tuesday afternoon’s no-bias trending. Room for noise above it up to 1613.00 was touched at Wednesday’s high. And yet another probe above last Friday’s 1609.50 high held as resistance.

[/pay]What’s Next… (Outlook and opportunities)[pay]
More buying pressure can be expended up to 1614.50 and 1617.00 during Thursday’s holiday trading. Greeting Friday morning’s report from above 1617.00 would be vulnerable to reacting favorably. But greeting it from under 1602.00-1604.00 would be vulnerable to selling off sharply into the weekend.[/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.