Today’s Trading Plan: What Selling

Technical Outlook:

• Strong follow through yesterday as stocks have now rallied 65 points since last Thursday. That is impressive and considering how tight the price range previously was – it’s a monster move. 
• Three weeks of losses that concluded in mid-May is now completely wiped out in just three trading sessions this week. That goes to show how hard and how fast a market can move and how you have to be willing to be flexible with your trading bias. 
• In essence, don’t get married to the long side or short side. 
• Head and shoulders pattern that had been in the works for over two weeks, was completely cancelled out yesterday. No surprise – the bears have become extremely good at blowing it at key moments. 
• Almost comical, you now have a massive inverse head and shoulders pattern that is forming over the past seven months. A move around ~2103 would confirm the pattern. 
• SPY volume fell off some yesterday and was below recent average levels. 
• It appears to me that the market isn’t seeing a lot of retail participants to the degree it had seen in past years. 
• 30 minute chart looks over-stretched a bit. The pattern of late for it has been to Rally, Rest, Rally, Rest, Rally, Rest. 
• VIX continues to melt away shedding another 3.6% to close at 13.90. The lower 13’s is where the indicator has consistently bounced hard at going back a couple of years. 
• USO broke the 50-day mvoing average yesterday and is now prime to see crude open above $50/barrel. 
• April highs of 2111 should be the next target for market bulls. Closing highs are 2102. 
• The longer-term head and shoulders pattern on the weekly chart going back two years would be nullified on a move back above 2116. 
• There is a lot at play here and a lot of potential to change the scope and shape of the market should this market continue rallying higher. 
• 2040-2138 price range on SPX continues to show just how difficult this price range is for trading, and over the last two years the price action has spent its time trading in it. 
• The up/down/up/down price action over the previous eight trading sessions ended yesterday with a second consecutive day of stocks rallying. 
• The 50-week and 100-week moving average have crossed two weeks ago to the downside. Last time this happened was 2001 before the tech correction and again in June 2008 before the mortgage crisis saw its major correction. 
• I believe at this point, profits have to be taken aggressively, and avoid the tendency to let the profits run – the market is in a very choppy range that has mired stock price for the past two years. Unless it breaks out of it and onto new all-time highs, then taking profits aggressively is absolutely important. 
• Historically the May through October time frame is much weaker than the rest of the year.

My Trades:

• Sold JPM yesterday at $65.58 for a 1.9% profit. 
• Added one new long position yesterday. 
• Currently 20% Long / 80% Cash
• I will look to add 1-3  new long positions to the portfolio today. May also hedge the portfolio if we start to see signs of weakness start to creep into the market.  
• Join me each day for all my real-time trades and alerts in the SharePlanner Splash Zone

Chart for SPX: