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Daily Trading Plan for December 7, 2011

Recs

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December 07, 2011 – Comments (0) | RELATED TICKERS: SPY

Economic Reports Due Out (Times are EST): MBA Purchase Applications (7am), Quarterly Services Survey (10am), EIA Petroleum Status Report (10:30am), Consumer Credit (3pm)

The Breakdown:

Futures are slightly negative heading into the open and tumbling well off of their session highs. 

Asia, as a whole, traded about 1.6% higher. Europe is currently trading slightly in the red.

S&P has for the second day been rejected off of the 200-day moving average and the downward trend-line coming off of the 7/7/11 highs. 

While I'd like to say this is bearish, it really isn't, because it hasn't resulted in a major sell-off on the overall day. Despite the rejection at these key resistance levels, the S&P finished both days in the green.

Volume reading dropped off yesterday on the S&P.

Little has changed for the market since yesterday.  

It is becoming very apparent that there is a huge disconnect between the US and Europe and the correlation with Asian markets. The Asian markets do not share our optimistic European outlook of late.

We are trading in a perfect channel (see chart below). Main focus at this point should be on the trend-line that started off of the 7/7/11 highs, and has proceeded downward ever since. If we break that downward trend-line, it will mark a bullish shift in sentiment for the markets.

Currently resistance for the trend-line lies at 1268. 

We are overbought in the short and intermediate time-frames.

Three days in a row that we've seen the market fade noticeably off of its highs, which tells me traders are more concerned with securing profits at this juncture.

Be very suspicious of the longevity and legitimacy of this market. To me it just reeks of another overdone bear-market rally, which tends to be extreme and exaggerated when they occur. This kind of action is not conducive to a bull market.

If the head and shoulders pattern forming on the weekly chart holds, then there is limited upside in the market from there.

Here's my chart analysis and conclusion

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