Trading Plan for September 21, 2011
Current Long Positions: QCOM Oct 60 Calls
Current Short Positions: None
BIAS: > 99% Cash
Economic Reports Due Out (Times are EST): MBA Purchase Applications (7am), Existing Home Sales (10am), EIA PEtroleum STatus Report (10:30am), FOMC Meeting Announcement (2:15am)
My Observations and What to Expect:
Futures are trading slightly in the red, after spending most of the night in positive territory.
Asia traded in a mixed fashion, while Europe was down on average about 1.5%.
The market, (S&P) exhibited strength through out most of the day, spending a good portion of it's afternoon range-bound at the highs, and then in the final 1.5 hours of trading, the S&P gave back all of its gains and finished in the red.
Yesterday's action was very bearish, and leads me to believe that we'll see further weakness going forward.
With the Fed announcement today, it is very difficult to gauge ahead of time, the direction it will go in. Expectations are very high for a big announcement, and Bernanke has a strong record of consistently pulling a "rabbit out of his hat". Which makes me nervous about holding, in particular, short positions ahead of the announcement.
The S&P came very close to breaking through the 50-day moving average yesterday but failed to do so.
On the S&P the 10-day and 20-day moving averages have converged and offer a fair amount of short-term support.
Volume has been extremely light so far this week.
We are now in overbought territory.
Resistance looms at the underside of the trend-line (now broken) from July '09, which is also in conjunction with where the 50-day MA is at - 1225 on the S&P.
S&P could be forming a head and shoulders pattern over the course of the last month. A dip lower from here is a must, and a break below 1159 would confirm the pattern.
Bearish Flag pattern that is in the works would also be confirmed at 1159 break.
As always, you need to be on your 'tippe-toes' for possible 'intervention' news to help stymie the Greece situation, particularly with the 2-day Fed Meeting this week too.
Support level that you need to watch today: Rising support off of the 8/9 lows (bear flag support) at 1159, followed by 1120 where there is significant support for the bulls, and then 1101 which is where the 8/9 intraday lows are at. All three of these could ultimately come into play today.
If the market breaks below 1101 on the S&P, then we are almost assured of seeing a test of the major support level at 1040 in the coming weeks.
My Conclusion: No way to predict how this market will end up today - It's impossible to know with any certainty what will come out of it, and playing it heavily long/short is dangerous.
Here Are The Actions I'm Taking: