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Trading Plan for May 18, 2011

May 18, 2011 – Comments (0) | RELATED TICKERS: SPY

Current Long Positions (stop-losses in parentheses): PEP (70.10), STZ (22.20), EP (17.84), EXPE (24.74), FTR (8.57)

Current Short Positions (stop-losses in parentheses): None

BIAS: 50% Long

Economic Reports Due Out (Times are EST): MBA Purchase Applications (7am), EIA Petroleum Status Report (10:30am), FOMC Minutes (2pm)

My Observations and What to Expect:

Futures are flat heading into the open.

Asia saw gains ranging from 0.5% up to 1%; Europe is trading up on average of 0.5%.

Commodities are showing noticeable strength heading into the open, with silver leading the way (up over 3%). 

To continue confusing both the bulls and bears, the market managed to recover into the close and finish right on 1329. 

On an intraday basis, the market dipped below the long-term trend-line (off of 9/10 lows) and the 50-day moving average. At the end of the day it managed to recover, close above those levels and form a nice bullish hammer candle.

S&P is at an inflection point - after today, we should have a much better idea of whether we are moving higher in the short-to-intermediate time frame or lower. The closing price is really what matters to me here.

S&P shows us trading in a well-defined downward channel on the 30-minute chart. We are currently trading at the bottom end of that range, and setting up nicely for a bounce over the next few days.

3 additional support levels to watch on the S&P: 1323 - 50-day moving average, 1325 - long-term trend-line, 1294 - another major long-term support level.

My conclusion: Yesterdays recovery off of the lows, and bounce into the close, leads me to believe we are prime for a dead-cat bounce at the very least.

Here Are The Actions I Will Be Taking: