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Trading Plan for June 7, 2011

Recs

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June 07, 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): ICSC-Goldman Store Sales (7:45am), Redbook (8:55am), Consumer Credit (3pm), Bernanke Speaks (3:45pm)

My Observations and What to Expect:

Futures are flat heading into the open.

Asia, overall was mixed in trading, but did show some strength on the day, while Europe is seeing gains range from 0.2% to 0.5%. 

Yesterday, the technical picture only got worse, as the S&P managed to close well below the 1294 level, and thereby establish a lower-low in the market. 

As a result, we are officially in a downward trend. The rally we saw off of the September lows, and onward, is dead. 

We are extremely oversold, on all time-frames, and as a result, well-overdue for a bounce. I expect to see a lot of shorts run for cover when this occurs, and possibly give the market a nice 2-3% pop before running into any resistance.

Volume continues to be slightly above average, which also helps to confirm recent selling. 

While we may bounce well before then, I believe that the market will ultimately make a run to 1250, before having a legitimate chance at recovering. 

We are only 29 points away from trading in the negative on the year. 

We have declined five straight weeks - the first time that this has happened since the March '09 recovery lows. We are definitely overdue for a bounce, and the possibility of seeing a sixth straight week of declines becomes less likely (which we haven't seen since July '08).

My conclusion: Near-term bounce in the markets, bears are too hot and heavy and will likely see a massive squeeze to flush them out before resuming the downward trend. 

Here Are The Actions I Will Be Taking:

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