Trading Plan for November 7, 2011
Current Bias: 100% Cash
Economic Reports Due Out (Times are EST): Consumer Credit (3pm)
Futures are only down slightly after being down as much as 19 points on the S&P at one point in overnight trading.
Asian markets are down on average about -0.5% while Europe is trading with losses of about -0.3%.
S&P is back to trading under the 200-day moving average, but at this point though, there seems to be the most support with the 20-day moving average, and and should be watched closely for whether the bears can push the market below it (closing price is all that matters - intraday breaks are somewhat irrelevant).
Volume in the market continues to be relatively light
A friend pointed out last night to me, a broader Head & Shoulders pattern that may be getting formed dating back to early 2010. If that is the case, then we are currently forming a right shoulder top and upward movement would likely be as good as its going to get for a long, long time.
On another H&S note, in particular the one that formed over the course of 2011, we are trading up against the neckline of this pattern, and should encounter some resistance.
Most, if not all indicators show the market as being extremely overbought at this stage and up against some stiff resistance.
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 think this market is overheating and while the gains may be nice, you have to view them as short-term and do everything you can to make sure that if this market reverses you don't loose those hard earned gains.
Here's the S&P Weekly Chart Mark-Up.