Start of Trade for the new week

As of late Friday, I expected a bit of a pullback from Friday's gap up, although we are above major resistance in the SPX and were above major resistance in the EUR/USD, both of which could create a short squeeze.

The SPY chart that summarizes my view Friday of some backing and filling Monday can be seen below...

As you can see the trend was in line on this 5 min chart on the 26 and part of the 27th, later on the 27th a negative divergence made a pullback the next day likely which happened, late in the afternoon on the 28th we saw a jump in 3C on some of the longer intraday timeframes leading to Friday's gap up. Although that played havoc with some of the shorter term intraday charts, the 5 min looks like the SPX is ready to back and fill in to the gap. I don't see this as a major move, but we'll see how it develops, it may very well open some opportunities to set up some long trades in to price weakness, assuming the EUR/USD and ES don't jump higher overnight, which would increase the chances of a short squeeze.

As for EUR/USD and ES opening tonight...

 From Friday's confirmation of the move up, we have a negative 1 min divergence in ES tonight as it reached highs near the open of trade tonight. The divergence in place now suggests that Friday's assumption of some backing and filling was correct, but we have a long night ahead and the European open at 3 a.m. EDT which can obviously change a lot.

EUR/USD...

 Last week we broke above the major resistance level for the ER/USD, but not yet above the June highs, that's where a short squeeze becomes much more likely.

Longer term you can see the June highs in the Euro, this is the level that needs to be broken above to see the chances of a short squeeze increase.

So far the sub-intermeduate trend expectations from a 3C perspective have held up pretty well, also our risk asset layout has held up pretty well, in other words we are not seeing the kind of divergences that suggest a return to the primary downtrend that we see in the longer term 3C charts.

As mentioned above, we have a long night ahead of us and a lot can happen, but thus far we seem to be on track with expectations. We just have to keep in mind the insane choppiness and volatility of the market and not get "lost in the lines", but rather use that to our advantage, which often means using your greatest edge over Wall Street, patience and the fact you don't ALWAYS have to be in the market.

Here's the economic calendar for the US this week:

As usual though, most of the focus will be on Europe. I'm particularly interested in the yields on Spanish and Italian 10-year debt to get a feel for whether bond traders really believe the EU will drop the debt seniority of the bank bailout in particular which makes sovereign debt holders junior to any EU bailout (that which caused Spanish yields to jump above 7% in the first place). It will also be interesting to see if a new ESM treaty on the bailout mechanism will be needed and if it will be ratified, there's a lot up in the air in the bond markets and that flows to the stock markets.

Everyone have a great week ahead and don't forget the markets will be closed in the US Wednesday with an early close of the NYSE Tuesday for the 4th of July.