Daily Trading Plan for December 19, 2011

Economic Reports Due out (Times are EST): Housing Market Index (10am)

Premarket Update (Updated 8am eastern):

• Futures are moderately higher heading into the open. 
• Asian markets are weaker with over -1% in losses. 
• Europe is trading higher between +0.2% and +1.3%

Technical Outlook (S&P):

• The S&P for the last two days have given up the early morning gains for two straight days and to close notably off of each day’s highs.
• 1191 seems like the logical area for the S&P to drop to before support kicks in.  
• Expect a very light volume week – especially as we head towards the Christmas holiday, volume will dramatically drop off. 
• Below 1217 breaks 3-day support on the 5 & 30 min chart. 
• S&P is short-term oversold. But doesn’t preclude the market from dropping lower, just that the risk trading to the short-side increases. 
• If the S&P breaks 1209 on the daily chart, then you have support at 1187, and then again at 1158.
• 1224-5 on the 30 min chart, represents strong resistance.
• Commodities look as if they could continue to bounce back as they did on Friday.
• Watch the VIX – it’s not on board with this sell-off at all, having dropped for a second straight day (bullish).
• Trend-line off of the 7/7 highs, just above the 200-day MA on the S&P, continues to act as resistance to price as well.
• Note the larger downward channel that we are in as noted below.

My Opinions:

• While we attempted to bounce on Thursday & Friday, the underlying tone of those attempts signals to me, that we still have more downside coming, before we see any type of recovery opportunity. 
• Should we continue the overnight weakness into the open, I will likely add additional shorts to the portfolio as days trades. 
• The Street continues to short rallies, as well as use them for taking profits before the end of the year. 
• I believe that a Santa rally is looking less and less likely. While it could still happen, I doubt it will be of any significance at this point. 
• The only way I could bring myself to adjust my bearish outlook on this market is if we break above the aforementioned downward trend-line off of the 7/7 highs. Then the entire outlook would be different for the market.

My Portfolio:

• 26% committed 13% long, 13% short. 
• I’ll continue to hold GLD (long) for now. A drop below its long-term trend line (back to 2008) would be reason for me to dump the position. 
• Make trades in TNA & TZA, but combined provided very little to speak of. 
• Held TZA position over the weekend – Buy in price at $29.51.
• Trading TNA on breaks of Resistance has provided very little in profit opportunity.

The Chart: