Trading Plan for February 1, 2011
Current Long Positions (stop-losses in parentheses): QID (10.44)
Current Short Positions (stop-losses in parentheses): None
BIAS: 7% Short (counts QID as a short)
Economic Reports Due Out (Times are EST): ICSC-Goldman Store Sales (7:45am), Redbook (8:55am), ISM Manufacturing Index (10am), Construction Spending (10am)
My Observations and What to Expect:
Futures are moderately higher prior to the open.
Asian markets were slightly up. European markets are seeing gains of about 1% on average.
Based on the morning futures and what we saw yesterday, the bulls are responding well to the sell-off we saw on Friday, and are making another attempt at 1300 - possibly even today.
Very strong probability that this morning gap-up that we are looking at is filled by the close.
S&P recaptured the 20-day moving average and is poised to open above the 10-day moving average again today.
Held the September trend-line yesterday, and dip buyers managed to prop back up the market yesterday afternoon when the bears applied some selling pressure.
Closing above 1300 is the all-important goal right now for the bulls.
Before we get to 1300, it is my personal belief that we'll see the bears come in strong and pounce on the bounce in the last two days.
Major trend-line support for the market rests at 1274, which also coincides nicely with a "higher-low" on the existing trend.
1300 on the S&P still represents major resistance in the short-term, as the market never closed above this important psychological price level.
Should we break below the September trend-line as mentioned above, the 50-day moving average will become the next logical support level, currently at 1250.
There are a lot of similarities to what happened on Friday, and what happened back in April, when the market was topping out as well. Action going forward has a high probability of being very volatile and choppy.
For the bears - Keep the bulls from closing above 1300 and sell the morning strength to fill the gap.
For the bulls - Rally and close above the highs from Friday, and obviously 1300 in the process.
Here Are The Actions I Will Be Taking: