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Trading Plan for November 21, 2011

Recs

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November 21, 2011 – Comments (0) | RELATED TICKERS: SPY

Economic Reports Due Out (Times are EST):Chicago Fed National Activity Index (8:30am), Existing Home Sales (10am)

The Breakdown:

Futures are significantly lower - nearly 20 points down. 

Asia traded down between -0.3% and -1.4%, while Europe is trading down on average of -2.4%

On Friday the market formed a nice doji candles which often times represents a stalemate between bulls and bears, but clearly that stalemate has been broken based on the open we are going to have today. 

Based on the morning weakness, we should open well below the 50-day moving average, as well as break through the 1215 and 1206 support levels on the S&P. 

Next support level comes in around 1190. After that there is little in the way going down to 1120. So yes, things could get very interesting here...very soon. 

Volume has been increasing over the last 3 trading sessions while we've been selling off. 

Short-term we are creeping into oversold territory. 

We're faced with a holiday week of trading so expect volume to be light and at times sporadic and unpredictable.

Assuming this market decides to continue marching lower, you can expect a ton of rallies throughout, before it gets to where it's 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: Pretty obvious here, you want to focus on the short side, ride the trend lower, and cover on increasing weakness throughout. 

Here's the S&P Chart Analysis.  

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