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Today's Trading Plan: Bear Flag Pattern Confirmed

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November 08, 2012 – Comments (0) | RELATED TICKERS: SPY , IWM , QQQ

Pre-market update (updated 8:30am eastern):

Europe is trading 0.4% higher. 

Asian markets traded -1.6% lower. 

US futures are moderately higher. 

Economic reports due out (all times are eastern): International Trade (8:30am), Jobless Claims (8:30am), EIA Natural Gas Report (10:30am)

Technical Outlook (SPX):

Biggest sell-off that we've seen since bouncing off of the 6/4 lows (last 30+ point sell-off was on 6/1). 

Price action went all the way down to the lower bollinger-band before closing on the day.

Bear-flag confirmation as we had talked about in yesterday's Trading Plan occurred at 1410. 

Price support levels at 1400 were decimated yesterday. 

A lower-low was established at 1403 as well as a previous lower-high. All bearish developments of an established downtrend. 

The 200-day moving average is definitely in play today. A break of 1380, and you can say this market's conditions become very dire. 

Last test of the 200-day moving average came on 6/4 where the market ended up bouncing handedly and forming a bottom as well, then rallying for the next 5 months. 

Yesterday's volume was the highest that we'd seen since 5/18/12. 

The fact that we did not see any kind of rally yesterday, despite the huge gap-down, was an obvious sign of a shift of market sentiment yesterday. 

Weekly chart also supports a breakdown in the previous channel.

VIX at 19. 

My Opinions & Trades:

Chart for SPX:

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