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Trading Plan for Feb 11 2011



February 11, 2011 – Comments (0) | RELATED TICKERS: SPY

Current Long Positions (stop-losses in parentheses): QID (9.99), TWM (11.39)

Current Short Positions (stop-losses in parentheses)LSI (6.53), GLD (133.67)

BIAS: 28% Short (counts QID & TWM as a short)

Economic Reports Due Out (Times are EST): International Trade (8:30am), Consumer Sentiment (9:55am)

My Observations and What to Expect:

Futures are seeing a slight amount of weakness heading into the open. 

Asian markets were mixed, while European markets are seeing a moderate amount of selling so far today. 

Interesting stat: S&P has finished above the 10-day moving average 47 of the last 50 sessions. 

Even more of an interesting stat: S&P has finished above the 5-day moving average 40 of the last 50 sessions. 

Since 12/1 the market has rallied nearly 12% without a pullback. 

Volume has steadily increased over the last two days, but it has also come on the heels of more selling than what we are used to seeing of late. 

Despite even the best of sell-offs, there is a constant bid beneath this market, that keeps the bears from pushing this market significantly lower. 

Once that bid/dip-buying disappears, the sell-off will be very similar to, if not more than what we saw on 1/28. 

One could make the argument that the last two trading days has seen us form a possible bull flag price pattern at the highs, but it is still to early in the development stages to be sure. 

While the market refuses to experience a correction of any type, there is some signs of weakening on the charts: 4 of the last 6 trading sessions have ended in a hanging man candle - which is classified as being a bearish candle. 

Despite the selling that we saw intraday yesterday, the market in the final hour managed to wipe away most of those losses, with the Dow finishing barely in the green for the eighth straight day.

Three support levels to watch on the S&P (as of Thursday's Close): 1307 (10-day MA), 1298 (20-day MA) and 1295 (Rising trend line off 9/1 lows). Break of all three of these including at the close, results in a very bearish shift in sentiment.

For the bears - Need to defeat the almighty Dip-Buyer. Can't make any substantial gains to the downside, until the afternoon buying activity is squashed. 

For the bulls - Build on yesterday's impressive recovery and rally to new highs. 

My conclusion: At this point it shouldn't be any major shock that the market refuses to roll over. However, I still remain firm in my belief, that until it does some, even if just temporarily, there is too much risk in this market to try and carve out a lot of new long positions.

Here Are The Actions I Will Be Taking:

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