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Trading Plan for August 3, 2011

August 03, 2011 – Comments (0) | RELATED TICKERS: SPY

Current Long Positions (stop-losses in parentheses): QCOM Oct 60 Calls, AAPL Sept 420 Calls, SPY Aug & Sept 136 Calls

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

BIAS: 10% Long

Economic Reports Due Out (Times are EST): MBA Purchase Applications (7am), Challenger Job-Cut Report (7:30am), ADP Employment Report (8:15am)

My Observations and What to Expect:

Asian markets were down over 2%, while Europe was down about another 1%. 

Yesterday was disastrous for the bulls. Breaking through all levels or support, and finishing 5 points above the March lows. 

S&P as a result is in negative territory for the year. 

Interestingly enough, the VIX was in negative territory the entire day until the last hour, when it surged higher. 

Yesterday's major sell-off had the markings of capitulation, particularly with the final hour surge in price that we saw in the VIX, and after the fact that the S&P had been down already 7 straight days.

Watch 1249 on the S&P today, as a move below it, would mark a new low for the market on the year. 

We have far exceeded the lower bollinger band, and the last time we did this we saw a major bounce in equities (from 3/16 lows), either we see at the very least a dead cat bounce, or we are on the verge of a market collapse. The former is much more likely. 

My Conclusion: Nothing is impossible, but we are in extreme oversold territory, so much so, that the lack of a market bounce here, could bring us something far worse in the market than what we've seen to date. 

Here Are The Charts & Actions I'm Taking: