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Daily Trading Plan for May 6, 2011



May 06, 2011 – Comments (0) | RELATED TICKERS: SPY

Current Long Positions (stop-losses in parentheses): GOOG (524.00), NFLX June 270 Calls, AAPL (343.95), SSO (53.99), AN (33.67), SLV (32.99)

Current Short Positions (stop-losses in parentheses): None

BIAS: 66% Long

Economic Reports Due Out (Times are EST): Employment Situation (8:30am), Consumer Credit (3pm)

My Observations and What to Expect:

Futures are significantly higher after 4 days of consistent selling. 

Asia overnight declined with Japan leading the say 1.5% lower. Europe was mixed. 

Yesterday represented a strong day of selling, with the S&P dropping below the 20-day moving average intraday, but settling just a shade above it at the close. 

Also worth noting is that the S&P pulled back (dipped below intraday) and closed just above the Fibonacci 50% retracement level at 1333, the same retracement level that we saw us touch back on 3/16. 

We are poised to open back above the critical 1340 level this morning. 

Going forward, I am looking for a similar response to the markets after bouncing off of the 3/16 lows. 

Watch for the market in the early morning as to whether the open will be faded. If it does so, it could be a sign that we have further downside remaining. 

The 30min chart that I provided yesterday shows the market needing to bounce off of the lower descending channel line. With the spike in price from the employment, we are breaking out well above that channel which is very bullish. 

We dipped slightly into oversold market conditions yesterday in the very short-term. 

By breaking 1340, we confirmed the inverse head and shoulders that had been in development since February '11. Last time we confirmed a IH&S pattern was back in Sept '10 and we rallied 220 points after the confirmation.

Higher-low has been established at 1294. Look for this pullback to establish the next higher-low.

My conclusion: A bad employment number was baked into the market, and with the beat in expectations, the market could see a very strong day today (already moving in that direction). 

Here Are The Actions That I Will Be Taking.

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