Trading Plan for Sept. 15, 2010

by Ryan Mallory

Current Short Positions (stop-losses in parentheses): SPY (113.30), DELL (13.26), FL (13.81), URBN (36.60)

BIAS: 44% Short

Economic Reports Due Out (Times are EST): MBA Purchase Applications (7am), Empire State Manufacturing Survey (8:30am), Import and Export Prices (8:30am), Industrial Production (9:15am), EIA Petroleum Status Report (10:30am)

My Observations and What to Expect:

• Futures are slightly down.
• Today is extremely important for the market, as the market is right below the all-important 1130 level on the S&P.
• Yesterday it came close to challenging it (1130), but as soon as it did a wave of selling hit the markets. 
• A perfectly formed doji candle was formed on the S&P yesterday. This typically signifies a huge warning sign to trend followers, that a reversal is imminent. Last time we had a similar shaped doji was on 7/6 which later resulted in a 12% market rally.
• If I had long positions here, I would start tightening my stop-losses and locking in gains.
• Market is still extremely overbought.
• Inverse head and shoulders pattern still not confirmed - must break through 1130 first.
• Bear's goal should be to drive this market below 1100 again. It would be a break of resistance and a shift in market behavior.

Actions I Will Be Taking:

• Depending on the early morning action, I will look to add an additional 1-2 new short positions to the portfolio today.
• A push above 1130 and I'll close out all of my short positions.
• Gap this morning is definitely fade-worthy.
• Will try to push my portfolio commitment up to 60-70% short. 
• Added URBN yesterday to the portfolio at 34.79. Stopped out of FL at 13.81.