Trading Plan for May 5, 2011
Current Long Positions (stop-losses in parentheses): GOOG (524.00), NFLX June 270 Calls, AAPL (343.95), SSO (53.99), STZ (22.39)
Current Short Positions (stop-losses in parentheses): None
BIAS: 62% Long
Economic Reports Due Out (Times are EST): Jobless Claims (8:30am), Productivity and Costs (8:30am), Bloomberg Consumer Comfort Index (9:45am), EIA Natural Gas Report (10:30am)
My Observations and What to Expect:
Futures are moderately lower, as commodities across the board, continue to sell off hard.
Asia, overnight, was flat, while Europe on average was down over 0.7%
With futures continuing to sell-off into the open, we are currently, poised to open at, or around the 1340 level on the S&P, which marks the breakout level that saw us move up to 1370. It's important that this level holds.
There are three important support levels to watch today on the S&P: 1) 1342: 38.2% Fib Retracement, 2) 1340 (mentioned in the previous bullet point) 3) 1333: 50% Fib Retracement.
We closed below the 10-day moving average, which in the previous two occasions has led to additional downside in the days that followed. However, on the previous two occasions, the break occurred on the first true down day. We've already seen 3 days of selling and are well off of the overbought conditions.
A move back above 1349, would bode well for stocks in the short-term.
With the huge jobs miss, we could see a significant miss in employment tomorrow.
Dip buyers are trying to buy the market lows each of the last two days. Watch to see if the same happens again today.
Volume saw a slight but noticeable uptick yesterday than what we've seen over the past two weeks.
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.
Higher-low has been established at 1294. Look for this pullback to establish the next higher-low.
My conclusion: Jobs missed big, and it could easily turn into a blood bath today, however, if the market can digest this news and recover off of these early losses we are looking at, we could see the market move higher in the short-term.
Here Are The Actions I Will Be Taking.