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Trading Plan for Feb 16, 2011

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February 16, 2011 – Comments (0) | RELATED TICKERS: SPY

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

Current Short Positions (stop-losses in parentheses)None

BIAS: 100% Cash

Economic Reports Due Out (Times are EST): MBA Purchase Applications (7am), Housing Starts (8:30am), Producer Price Index (8:30am), Industrial Production (9:15am), EIA Petroleum Status Report (10:30am), FOMC Minutes (2pm)

My Observations and What to Expect:

Futures are looking at moderate gains at the market open. 

Asian markets saw gains ranging from 0.6% to 1.1%, while the European markets are trading in the green as well with gains as much as 0.7%.

S&P, for only the 4th time in the last 18 trading sessions, finished lower. But the losses were very minimal, (as was the last two sessions prior that the market finished lower).

While volume was much higher than the day prior, still the volume was only average compared to the levels that we have seen this month. 

With the futures indicating a gap up this morning, this is a prime opportunity for the bears to shift the momentum to their corner by fading this gap and pushing the market lower. Until it can do that, it will be difficult for a true correction to occur in this market. 

Short-term trendline off of the 2/3 lows has support at 1325 - break it and we could see additional selling pressures hit the market.

No major price resistance overhead for the markets until it hits the 1370's. 

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 the dip buyers are defeated, that is when this market will see the correction that I am anticipating.

Three support levels to watch on the S&P (as of Monday's Close): 1319 (10-day MA), 1304 (20-day MA) and 1300 (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 see them fade the gap up at the open, and provide additional follow through on yesterday's slight sell-off. 

For the bulls - Erase yesterday's minor losses and move again to new recovery highs. 

My conclusion: Sell-offs like yesterday won't strike fear into the heart of the bulls, instead, it will only be viewed as buying opportunities. Until we see a sustained multiday-sell-off with minimal bounces, the bulls have nothing to worry about. 

Here Are The Actions I Will Be Taking:

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