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Trading Plan for November 17, 2011

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November 17, 2011 – Comments (0) | RELATED TICKERS: SPY

Economic Reports Due Out (Times are EST): Housing Starts (8:30am), Jobless Claims (8:30am), Bloomberg Consumer Comfort Index (9:45am), Philadelphia Fed Survey (10am), E-Commerce Retail Sales (10am), EIA Natural Gas Report (10:30am)

The Breakdown:

Futures are down moderately heading into the open. 

Asia is trading in a mixed fashion, while Europe is down on average about -1.8%.

Yesterday's late afternoon sell-off saw the S&P close right on the bottom support of the wedge/triangle we've been trading inside of for the better part of a month now. 

Today's potential weakness at the open would have us break out of that triangle, and confirm a break down formation, but only as long as we are able to close below 1236.

Next area of support will be found at 1215, and then 1205, which is where the rising 50-day moving average resides at today. After that, look for 1190ish. 

Volume picked up in comparison to the last 3 days, but still below average. 

If the market can recover off of the morning weakness, the upside breakout of the triangle is at 1267. 

We are still about a good sell-off (like last week's) away from being oversold in the short-term. 

Intermediate and long-term indicators, still show us for the most part in overbought territory. 

Remember: the wedge that we are currently trading in, represents the #1 market variable to be keeping our eyes on. Inside of the wedge, the price action is meaningless. Outside of it, you have clear direction for trading.

We filled the gap up from 11/11 yesterday. 

We are close to seeing a 10-20 day MA negative crossover. Last time this happened (back on 9/20) we saw a significant amount of selling that ensued over the next couple of weeks.

Even if this market decides to continue marching lower, you can expect a ton of rallies throughout, before it gets to where its going to settle. If you can stomach those rallies...fine. If not, you need to become a pro at consistently covering in weakness.

Worth noting as well, is the obvious head and shoulders pattern forming on the weekly chart. Should this be the case, I'd expect then that this market is reaching a short-term top very fast.

Make sure that whatever you do, that you protect the gains that you have, and be ready for sudden and quick reversals in this market.

My Conclusion: I'm still holding on to my belief, as I've been saying of late, that this market will break out of the triangle to the downside, and we should see volume rapidly pick up in the process. 

Here's my chart breakdown of the S&P.  

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