Trading Plan for March 7, 2011
Current Long Positions (stop-losses in parentheses): CPWR (10.90), TICC (11.90), PGH (12.65), EMC (26.38), LSCC (6.52)
Current Short Positions (stop-losses in parentheses): None
BIAS: 27% Long
Economic Reports Due Out (Times are EST): Consumer Credit (3pm)
My Observations and What to Expect:
Futures are slightly up and choppy heading into the open.
Asian markets saw returns range from -1.8% to as high at +1.8%, while European markets are trading slightly higher.
Friday's trading session marked the third significant reversal in last week's trading - very choppy and erratic week to say the least.
Yesterday's market rally was huge for the bulls, and formed a short-term double bottom in the markets and wiped away all of the losses from Tuesday.
Despite the strong sell-off that we saw last week, we saw dip-buyers jump in toward the end and wipe out half the losses, and the overall volume levels were less than what we have seen of late on down days.
Finished below the 10-day moving average but above the 20-day moving average. The crossover to the downside of these two moving averages, implies that we could see some further selling in the short-term.
Short-term double bottom forming on the S&P. In order to nullify that, we'll need to see price close below 1302.
Friday was the complete opposite of my expectation and belief that we'd see some follow through, and as a result, I remain very cautious about getting too heavy to the long side, until we see some price confirmation to the upside.
A break of S&P 1294 (last week's lows) would put in a lower-low in the markets, and confirm a downtrend being in place.
Market continues to trade specifically to the strength/weakness in oil. Rising oil prices will continue to hamper the markets going forward. It is also the only currency, commodity, etc. that the market seems to be correlated with these days.
For the bears - Fade the morning gap, and push the market below Thursday's lows and ultimately below 1302.
For the bulls - Break and close above the highs from Friday, and you, at least temporarily, make a strong case for making new recovery highs in this market.
My conclusion: Hard to take any solid stance in this market, especially with what we saw on Friday. At this point, you have to "Play it by ear" and expect the unexpected.
Here Are The Actions I Will Be Taking: