Trading Plan for Nov. 9, 2010
Current Long Positions (stop-losses in parentheses): TICC (10.28), NFLX (165.00), MCD (76.92), QID (11.92)
Current Short Positions (stop-losses in parentheses): SBUX (31.37)
BIAS: 7% Long (-10% short considering the leverage in QID)
Economic Reports Due Out (Times are EST): ICSC-Goldman Store Sales (7:45am), Redbook (8:55am), Wholesale Trade (10am)
My Observations and What to Expect:
Futures are showing some strength after rallying off of its overnight lows on European market strength.
Asian markets were mixed, while European markets are showing positive gains across the board.
Like yesterday, the market still needs to come back down some as it is currently overextended making a a trade at this point filled with more risk than reward.
With the upside break through the 200-WEEK moving average, history suggests that such an event leads to a significant long-term rally in the markets.
1275 on the S&P (give or take a few points) represents the next area of resistance on the charts.
Also causing resistance in the very near term is the fact that we are at the 61.8% Fibonacci Retracement level from the Oct. '07 highs to the March '09 lows.
Initial support for the S&P on a pull-back lies at the April highs which is 1219 or six points below where it is currently trading. We tested this level yesterday, and bounced quickly thereafter.
I'd continue to urge people against shorting the market on the premise that the market is "too-high" or "economy is awful". There is no reason right now to be heavily shorting with the belief that this market will see an extended move downwards.
No major economic news reports scheduled and earnings season is starting to wind down.
Bear's aim is to hold the Fibonacci retracement levels, and push the market down closer to the 10-day moving average and ultimately challenge those price levels (1198).
Actions I Will Be Taking: