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Trading Plan for Feb 23, 2011

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February 23, 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), ICSC-Goldman Store Sales (7:45am), Redbook (8:55am), Existing Home Sales (10am)

My Observations and What to Expect:

Futures are up moderately ahead of the market open. 

Asian markets saw mixed returns ranging from 0.8% down to 0.25% up. European Markets were much more stable than yesterday ranging from -0.6% to 0.2%. 

Finally saw the first major sell-off in the market since 1/28. 

The market also closed below the 10-day moving average yesterday, but found support at the 20-day moving average. 

It is very troubling to me that the bulls managed to keep the S&P just above this all-important moving average. Last time we tested it and failed to close below it, we saw a significant bounce off of the MA on 1/20/11.

Volume was the second highest total of the year indicating a lot of strength behind the selling yesterday. 

I won't begin putting any legitimacy behind this sell-off, until we break and close below the 20-day moving average AND the long term trend-line dating back to 9/1 which both sit at 1314 and 1310 respectively. 

Oil will continue to climb until the oil wells are secured and the situation in Libya is resolved. 

Another major sell-off will put the 50-day moving average in play at 1285. 

For the bears - Follow-through for once. Failure to do so will only reinvigorate the bulls. 

For the bulls - Cap  the losses here, and work as quickly as possible to wipe away the losses from yesterday, in similar fashion to the rebound after the 1/28 sell-off. 

My conclusion: Bears are on the right track, but more important than yesterday is what they manage to do with today. Lack of follow through, will only bring back the bulls into the fold, and prop this market right back up. 

Here Are The Actions I Will Be Taking:

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