Trading Plan for 7/8

Last-minute optimism or pessimism… ahead of a weighty news item can be counter-trend. Strong hands were already positioned for Friday morning’s Employment Situation report before Thursday afternoon. So, the fresh highs at 1352.75, or the closing bounce pu to 1352.25, can suggest that weak hands are optimistic. [pay]

Pattern points… (Setups and technicals)
By the same token, the afternoon’s interim dip to 1348.75 could have been last-minute pessimism. And that could have been bullish. The dip could have refueled buyers to facilitate a favorable reaction Friday morning. But the dip was recovered by a last-minute bounce into the close.

The last-minute bounce stopped 2 ticks short of touching the session high, and 2 points short of touching 1354.50. That is unfinished business above, left outstanding from the afternoon’s 1349.00 bias-up signal

Having bounced enough to attack session highs, 1354.50 could be tested easily overnight. Testing it and reversing down back under 1349.00 would be bearish – whether overnight or intraday. Quickly breaking or gapping open under Thursday’s ~1345.00 low would be bearish. Almost any other setup would be bullish.

The bigger picture has yet to turn bearish. There has been an opportunity to peak upon testing 1339.00-1340.00, and the scenario would begin to form by closing Friday under 1339.00-1340.00. Closing Friday above Thursday’s 1354.50 high would put into play 1372.50-1373.00. Closing Friday between 1340.00-1354.50 would leave the trend vulnerable.

What’s Next… (Outlook and opportunities)
The breakout above 1339.00-1340.00 is still fresh, and at its most vulnerable to fail. The next major resistance is also fresh, and just above at 1354.50. The Employment Situation report is being preceded by Monster’s Employment Index, a rarity. The bullish scenario may be better off correcting Friday back down to 1339.00-1340.00, instead of trying to extend aggressively higher.[/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.