Daily Trading Plan for December 21, 2011

Economic Reports Due out (Times are EST): MBA Purchase Applications (7am), Existing Home Sales (10am), EIA Petroleum Status Report (10:30am)

Premarket Update (Updated 8am eastern):

• Futures are slightly down after selling off its overnight gains. 
• Asian markets were up on average about 1.4%
• Europe is trading lower at -0.7%. 

Technical Outlook (S&P):

• Yesterday’s rally engulfed the previous 5 days of trading activity. On the hourly chart, it finished with 7 straight green candles.
• Such moves intraday, have often led to strong sell-offs the next day, which could very well be the case today. 
• On the daily chart, the action looks muddled with yesterday’s strong move, and is currently in “no man’s land” within the triangle price pattern (noted in the chart below).
• Support on the S&P breaks down at 1240 on the 5 minute chart. 
• 1196 is still very much in play, as a critical, rising support level for this market. 
• Expect a very light volume week – especially as we head towards the Christmas holiday, volume will dramatically drop off. 
• S&P, after yesterday’s move, is off of oversold conditions. 
• 10, 20, and 50-day moving averages were reclaimed. 
• 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 shown below.

My Opinions:

• I have my doubts about whether this rally we saw yesterday is sustainable. 
• Yesterday proved why swing-trading in this market is so difficult – as we got a +3% move out of the market that wiped out 5 days of consistent selling in the market. That is rough man!
• 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. 
• No day-trades for me yesterday, but I did add more to my existing TZA position for a full position. My buy in price is at $28.29.
• 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. 
• I’m looking to dump my TZA position on a pullback in the broader markets. 

The Chart: