Trading Plan for 7/5

If any day can rally like Friday… it’s Friday. The morning’s bias signal tends to persist through the noon hour. And if any day can rally like Friday, it’s the day before a three-day weekend, whose evaporating liquidity scares away counter-trend sponsorship… Don’t forget: no Saturday Strategy Session this weekend.[pay]

Pattern points… (Setups and technicals)
Closing Thursday above 1310.00 had signaled the rally to 1307.00-1308.00  was extending higher. It’s next objective is 1339.00-1340.00. Closing Friday above the afternoon’s 1334.00 bias-up put into play the next higher target, which is 1339.50.

Compared to the measurements of Friday’s uncorrected upleg, 1339.00-1340.00 is just noise around its 1336.50 high.

Meanwhile, 1307.00-1308.00/1310.00 didn’t get much recognition on the way up. Only pre-open action was influenced by 1307.00-1308.00 resistance. And 1310.00 was barely touched as support. The area’s relevance all but demands that it be revisited – whether by a pullback on the way higher, or by a new downleg.

Extending higher, uninterrupted through 1339.00-1340.00, would put into play new highs. New highs, as in probe May’s high, and the overnight Bin Laden bump, too. And the leg’s initial pace would be very aggressive, validating the past week’s runaway optimism instead of correcting it.

What’s Next… (Outlook and opportunities)
Friday’s rally was a surprise. Wednesday’s three-day weekend indicator had suggested the trend would remain up, but the week was already very extended. The day was extended, too, trending up through every timing window. Tuesday’s volume won’t be much busier than Friday, so we’ll see whether that was more responsible for the trend’s direction, or for its relentlessness… Have a safe and happy Independence Day! [/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.