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Trading Plan for August 4, 2011

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August 04, 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): Jobless Claims (8:30am), Bloomberg Consumer Comfort Index (9:45am), EIA Natural Gas Report (10:30am), Treasury Strips (3pm)

My Observations and What to Expect:

Futures are 1% lower. 

Asia is seeing markets range from flat all the way down to -2.0%. Europe is down on average well over -2%. 

S&P made a nice test of the lower descending channel yesterday and held it perfectly before bouncing into positive territory for the first time in eight days. 

S&P  formed a huge hammer on the daily charts on the biggest volume in over a month. Strong (sign despite today's early weakness) that a reversal is near. 

We are still seeing price outside the lower-bollinger band on the S&P, which is nearly impossible to sustain. Today would be the 3rd straight day of as much. 

Dollar is showing a lot of strength, which isn't helping the market either due to the yen intervention from Japan. 

Bulls need to do everything they can to hold yesterday's lows at 1234. 

Volume continues to strengthen each day. 

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: Very volatile day should be expected throughout today. Ultimately the bulls need to do everything they can to chip away at the huge sell-off from this past Tuesday, and eventually reclaim the 200-day moving average (still a long ways away at 1286). 
Here Are The Actions I'm Taking

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