Trading Plan for Feb 28, 2011
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): Personal Income and Outlays (8:30am), Chicago PMI (9:45am), Pending Home Sales Index (10am), Farm Prices (3pm)
My Observations and What to Expect:
Futures are up moderately ahead of the open.
Asian markets seeing gains between 0.9% and 1.4% while European markets are mixed in their trading.
Solid bounce in terms of price on Friday, however the volume was weak and below average, which concerns me and makes me consider that this bounce is more of dead-cat bounce than a legit move to new highs.
Candle pattern over the last three days on the S&P has formed a bullish morning star pattern, which signifies short-term bottoms on the charts.
Uprisings in the Middle-East and their effect on oil production and output, will continue to remain on the forefront of trading, and any changes that occurs will have an impact on the markets.
Volume will need to improve, if this market bounce wants to hold.
With Friday's rally, the S&P recaptured the 20-day moving average and trend-line dating back to to 9/1.
A new "lower-low" would come from a break of the 1/28 lows at 1275. If we break that level, we are in a confirmed downtrend.
For the bears - Sell the early morning strength and close below the 20-day MA and 9/1 trend-line mentioned above.
For the bulls - Need to see a close back above the 10-day moving average, which has acted of short-term support for much of this 6-month rally that we have been on.
My conclusion: The jury is still out on whether the bounce we saw on Friday is legit, or whether we are going the bears pounce on it as a shorting opportunity. Staying nimble and light at this juncture is the best idea right now.
Here Are The Actions I Will Be Taking: