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Today's Trading Plan: Outside of Mr. Bollinger

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November 09, 2012 – Comments (0) | RELATED TICKERS: SPY , DIA , QQQ

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

Europe is trading -0.8% lower. 

Asian markets traded -0.8% lower. 

US futures are moderately lower. 

Economic reports due out (all times are eastern): Import and Export Prices (8:30am), Consumer Sentiment (9:55am), Wholesale Trade (10am)

Technical Outlook (SPX):

SPX continued the push lower yesterday, with selling persistent throughout the day. 

On a technical note, SPX closed below the 200-day moving average without a fight. 

Price is currently well outside of the lower-bollinger band. 

Short-term we have, surprisingly, yet to get oversold in this market. 

New channel to the down side has formed and price is trading nicely inside of it, but with yesterday's sell-off it is touching the lower band, which means we could be setting up for a bounce in the coming days. 

Back in October we traded outside of the lower bollinger band and remained out there for two straight days, before bouncing back to the 20-day moving average. 

Volume, though less on Thursday than the previous session, was still notably higher than normal. 

Biggest wave of selling that we've seen since bouncing off of the 6/4 lows.

Bear-flag confirmation as we had talked about before occurred at 1410. 

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

Last time we broke through the 200-day SMA, it led to a major sell-off in August 2011 that lasted through early October of that same year. 

The 30-minute chart also validates the daily chart with the well-defined downtrend that is in place. 

Divergence in the VIX yesterday as it closed lower on the day at 18.48. 

My Opinions & Trades:

Chart for SPX:

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