Trading Plan for May 10, 2011
Current Long Positions (stop-losses in parentheses): GOOG (529.00), NFLX June 270 Calls, AAPL (343.95), AN (33.67), NTAP (50.98), TZOO (72.45), B (24.25)
Current Short Positions (stop-losses in parentheses): None
BIAS: 52% Long
Economic Reports Due Out (Times are EST): NFIB Small Business Optimism Index (7:30am), ICSC-Goldman Store Sales (7:45am), Import and Export Prices (8:30am), Redbook (8:55am), Wholesale Trade (10am)
My Observations and What to Expect:
Futures are moderately higher heading into the open.
Asia was up on average 0.5%. Europe saw a very strong rally of 1.5% as a whole. All of the world markets are up going into the open.
From what happened on Friday, and last week in general, yesterday's response - moving 6 points higher on the S&P - was a best case scenario, and sets a nice tone for the week ahead.
Seeing Europe and Asia rally strong overnight, and particularly Asia, sets a solid tone going into the open.
I would like to see the S&P regain the 10-day moving average, which it is currently sitting underneath at 1351. Early morning strength puts us in position to challenge that moving average at the open.
1329 marks the lows of last week's pullback, and if we move higher in the day's ahead, that will become the S&P's new higher-low.
On the 30min charts, a move above 1350 would take us out of the expanding downward channel the market has been trading in since 5/2 (megaphone shape).
20-day moving average has provided some support in the last 3 days, which also corresponds nicely with the 1340 support level.
Volume was extremely light yesterday - watch to see if it picks back up again today.
I am still looking for a similar response to the markets after bouncing off of the 3/16 lows.
By breaking 1340, we confirmed the inverse head and shoulders that had been in development since February '11. Last time we confirmed a IH&S pattern was back in Sept '10 and we rallied 220 points after the confirmation.
My conclusion: If we can close above Friday's highs, I think we will be in position to challenge and make new Recovery highs. Here Are The Actions I Will Be Taking