Trading Plan for May 16, 2011
Current Long Positions (stop-losses in parentheses): NTAP (52.45), PEP (69.75), RSH (15.93), STZ (22.20), CHKP (54.19), SSO (53.35)
Current Short Positions (stop-losses in parentheses): None
BIAS: 60% Long
Economic Reports Due Out (Times are EST): Empire State Manufacturing Survey(8:30am), Treasury International Capital (9am), Housing Market Index (10am)
My Observations and What to Expect:
Futures are down moderately ahead of the open.
Asia, as a whole, was about down 1%, and Europe is worse trading with losses of about 1.2%.
Currently there is some mixed sentiment surrounding commodities this morning with silver continuing its decline with oil, while gold is actually showing some strength.Dollar is showing a hint of strength as well.
Some weekend news that may be weighing on the market - 1) fighting around the Israeli boarder. 2) Head of IMF arrested on rape accusations.
The 1340 breakout level was broken on Friday. Now the big question is whether it can hold is previous higher-low at 1329. We are setting up for a challenge of it right at the open.
There is also a rising, long-term trend-line to watch at 1319 on the S&P.
Over the last two weeks, the market mentality has been to bend but not break and that is exactly what it did last week.
We broke the 20-day moving average, which had provided a descent amount of support in previous sessions. The 50-day is at 1323, but for me I'll be more concerned with the 1329 level.
A break of 1329, will likely see 1290 in the near future.
By breaking 1340 recently, 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: I still remain cautiously bullish, and will be drawing a line in the sand at 1329. If we close below that level, I'll be closing out my long positions and re-evaluating my trading strategy at that point.
Here is my Chart Analysis on the S&P.
Here Are The Actions I Will Be Taking: