Trading Plan for August 31, 2011

by Ryan Mallory

Current Long Positions (stop-losses in parentheses): QCOM Oct 60 Calls, AAPL Sept 420 Calls, SPY Sept 124 Calls, XIV (6.99)

Current Short Positions (stop-losses in parentheses): None

BIAS: 9% Long

Economic Reports Due Out (Times are EST): MBA Purchase Applications (7am), Challenger Job Cut Report (7:30am), ADP Employment Report (8:15am), Chicago PMI (9:45am), Factory Orders (10am), EIA Petroleum Status Report (10:30am), Farm Prices (3pm)

My Observations and What to Expect:

• Futures are slightly higher heading into the open (as of 12am ET).
• Like old-times, the S&P managed to give up the bulk of the day's gains. 
• We ran into some resistance near the 50% retracement level on the S&P today.
• S&P managed to close a shade above the old trend-line dating back to July '09.
• Tomorrow marks the first trading session of the month - So far this year 4 out of 8 have finished up, while 3 our of the last 4 sessions have finished down. Most of the moves, in either direction, are significant moves. September 1st of last year, marked the beginning of a new bull rally.
• Ultimately the bulls look poised for a continued move to 1250. But I am noticing that this market is quickly becoming "tired as evidenced by the last two sessions. The 50-day moving average currently sits at 1255.
• We are currently trading in overbought territory in the short-term. 
• Volume improved noticeably today. Could be from end-of-month window dressing though.
• Support now is at 1174 for the market. A break below that level would send prices likely down to 1120 again. 
• Market is starting to show some exhaustion in the short-term, but nonetheless, can still rally a lot higher than  bears as a whole would expect. Respect the current trend that is in place.

Here Are The Actions I'm Taking:

• Sold my XIV position for a 3.2% gain at $8.08
• I'll be looking to play some over sold bounce plays as well as a few break out plays today.
• Strength on a bounce today will likely be my cue to get out of the remaining SPY calls that I own. 
• Follow me in the SharePlanner Chat-Room today for all my live trades and ideas (as well as everyone else's).

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