Today’s Trading Plan: Ahead of Headline Risk

Technical Outlook:

• It didn’t take long for the bears to jump back on the sell-everything bandwagon and they did so yesterday by wiping out all but 9 points of Friday’s gains. This will no doubt come as a huge disappointment for the bulls to start the week. 
• This immediately puts the bulls back against the ropes. Oil and China – both dropping this market, but it is oil more so. 
• In premarket action SPX futures has managed to rally from 1% down to trading back in the green. Likewise, oil has managed a similar reversal after trading over 3% down to be back in the green again. 
• The most unfortunate development is that SPX lost the 5-day moving average yesterday, which rapidly increases the odds that it will test the lows from last Wednesday again in the near future. 
• Surprising though was the lack of volume on the sell-off, something we have not seen at all this year and below the volume from the rally of last week. In fact SPY volume was below recent averages. The first time that has happened since 1/5. 
• The inverse head and shoulders pattern on SPX 30 minute chart is still in effect, despite the 30 point sell-off. 
• Today could be the ultimate bear trap, as the shorts piled in yesterday believing that the downtrend would resume, if the market was to reverse back higher today, it would send many bears scurrying to buy up shares and cover their positions in a short-squeeze environment. 
• VIX rallied 8.1% back up to 24.15.
• Not a huge sell-off compared to the moves that we have seen of late in the T2108 (% of stocks trading above the 40-day moving average) as it dropped 20% down to 11.24. 
• There are a number of significant earnings reports this week including Apple (AAPL), Facebook (FB) and Amazon (AMZN) not to mention a FOMC Statement tomorrow and GDP on Friday. So there are a lot of headline risks taking place both during and after market hours. 
• The only time we have really seen significant short squeezing from the market was Wednesday afternoon. Either the bears think they can ride this rally out, or the shorts are going to be forced to cover at much higher levels than anticipated. 
• Confirming the head and shoulders pattern on the weekly chart of SPX/SPY will be critical for the bears if they are going to keep the downtrend going. 

My Trades:

• Closed FB yesterday at $97.27 for a 5.2% gain. 
• Closed DIS yesterday at 95.78 for a 2.3% gain. 
• Closed GS yesterday at 153.66 for a 1.8% loss. 
• Added two new swing trades to the portfolio yesterday – one long and one short. 
• Currently 10% long, 10% short, 80% Cash
• Very difficult market to navigate this week. Major earnings reports including AAPL, AMZN, FB as well as FOMC Statement and GDP. Lighter is better here. 
• Join me each day for all my real-time trades and alerts in the SharePlanner Splash Zone

Chart for SPX: