Trading Plan for December 5, 2011
Economic Reports Due Out (Times are EST): Factory Order (10am), ISM Non-Manufacturing Index (10am)
Futures are gapping higher in excess of 1% as we head into the open.
Asia traded about 0.6% higher, while Europe is trading on average about 1% higher.
On Friday we tested the 200-day moving average and failed to break through it. For the remainder of the day we saw a slow steady serving of the market selling-off, and erasing the entire day's gap-up.
Today we are staring at another significant gap up, which will once again open us up above the descending trend-line on the S&P.
Counting today's likely gap-up, we are looking at 3 significant gaps in the charts, in the last 6 days, that have yet to be filled.
Volume was relatively light all of last week, with the exception occurring on Wednesday.
S&P is now entering overbought territory.
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.
Volume surges like what we saw Wednesday, especially when it practically doubles previous volume readings, can represent looming reversals about to happen in the market.
If we are able to close above 1246 on the S&P, there is a good chance that we will push even higher in the short-term.
At 1264 you have the 200-day moving average.
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 conclusion and chart analysis.