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Trading Plan for Feb 17, 2011

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February 17, 2011 – Comments (0) | RELATED TICKERS: SPY

Current Long Positions (stop-losses in parentheses): DXD (17.99), TGB (5.91)

Current Short Positions (stop-losses in parentheses)None

BIAS: Neutral (counting DXD as a short)

Economic Reports Due Out (Times are EST): Jobless Claims (8:30am), Consumer Price Index (8:30am), Leading Indicators (10am), Philadelphia Fed Survey (10am), EIA Natural Gas Report (10:30am), 

My Observations and What to Expect:

Futures are flat heading into the open. 

Asian markets saw gains as high as 0.6% , while the European markets are showing a slight amount of weakness.

Markets responded well yesterday to the slight amount of selling it saw the day prior by closing at new recovery highs. 

Apple (AAPL) should be closely watched, in regards to the health of Steve Job's and the rumors surrounding it. The markets are likely to become very volatile in reaction to any major news events that comes from AAPL. 

Volume was slightly less than what we saw in Tuesday's selling, but overall on par with average volume levels. 

S&P has closed above the 10-day moving average 51 out of the last 54 trading sessions. A 95% success rate - practically unheard of. 

February options expiration is tomorrow, so be prepared for anything, not to mention the market is closed on Monday, so we'll be trading ahead of a three day weekend. 

Reports this week suggest that inflation is starting to creep up some, which could force the Fed to begin tightening rates sooner than expected. 

Short-term trendline off of the 2/3 lows has support at 1328 - 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): 1323 (10-day MA), 1307 (20-day MA) and 1303 (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 - Use the miss on the inflation numbers to drive the market lower, and close below Tuesday's lows. 

For the bulls - Continue to push higher and higher. 

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

Here Are The Actions I Will Be Taking:

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