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Trading Plan for Feb 18, 2011

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February 18, 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: 7% Long

Economic Reports Due Out (Times are EST): Options Expiration

My Observations and What to Expect:

Futures are flat heading into the open.

Asian markets were mixed with losses of 1% ranging up to gains of 1.3%, and European markets are doing the same but in a much tighter range (-0.5% to 0.2%).

Three day weekend to celebrate President's Day. Markets will be closed on Monday.

One of the biggest things I notice about this market is that there is little to no fear of it, and making money is becoming too easy for retail investors. Which continues to concern me. 

Despite another dip (this is beyond a theme - more like a God-given right at this point) the market popped higher by the end of the day to close, yet again, at new recovery highs. 

Typically as trends mature, the trend tends to get flatter, but ironically, the S&P continues to see its trend-line get steeper and steeper.

What is making this market so difficult to evaluate is the active participation that the Fed is playing in it (a player with no real profit interest) through QE2. The market is literally hooked to and dependant on an entity that has unlimited resources (just keep the printing machines running). 

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 regarding this.

S&P has closed above the 10-day moving average 52 out of the last 55 trading sessions. A 95% success rate - practically unheard of.

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 trend-line off of the 2/3 lows has support at 1333 - break it and we could see some 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): 1326 (10-day MA), 1310 (20-day MA) and 1305 (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 - Nothing new here - simply find a way or reason to push the markets lower. 

For the bulls - Some consolidation wouldn't be a bad thing for this market - something we haven't see a great amount of since November. 

My conclusion: The crowd is piling into the markets, people are trusting it again, 401k's are becoming re-invested, and 99% of the country has no idea what QE is or that it is even taking place. What would you conclude?

Here Are The Actions I Will Be Taking:


 

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