Today’s Trading Plan: Anything Goes

Technical Outlook:

• Despite a solid start for the market that lasted all of 10 minutes, the market proceeded to sell off 60 points from the highs of the day, going from 1950, all the way below 1900 to settle at 1890. A dramatic sell-off to say the least. 
• Oil inventory report really sped up the sell-off. 
• SPY volume matched the highest volume reading of the year so far, going back to 1/4/16. 
• Most impressive was the intraday TICK reading that reached a -1599 – that is lowest reading recorded in nearly two  years, with 3/19/14 giving us a -1623 reading. 
• T2108 (% of stocks trading above the 40-day moving average) dropped 32 points down to 9.5%. This is an extreme reading only matched by the sell-off in August 2014, August 2011, and the bottom of the Great Recession in March 2009. So yes, this extreme reading will often mark bottoms of major sell-offs. 
• Support was found at the close as noted in the chart below. Whether it holds or not, is anyone’s guess. 
• While Technically it may look like the market is acting like “2008” again, the fundamental catalysts do no exist for that. Banks are not at the brink of disaster, real estate is not collapsing. Yes, the oil has collapsed, but oil has almost collapsed already 80% from 2014 highs and the market is down 12% from its 2014 highs. I’m not saying that this market is strong…. far from it, I am simply saying that comparing this market to 2008 is not an accurate comparison. 
• VIX with a reading of 25.22 after rising 12% yesterday. Somewhat light and surprising considering the level of bearishness in the market yesterday. 
• The bears, even at these levels are still trying to aggressively short the market, which will ultimately lead to a massive short squeeze. At this point, getting short makes absolutely no sense, and are better off waiting for the relief rally to take place before trying to short this market again. 
• Oil is attempting to find a bottom, if only temporarily, at the $30 level. Oil continues to have a serious stranglehold on day-to-day price action.  
• The same banks that are right now calling for $20 oil are the ones just a few years ago saying that we’d be trading over $200/barrel right now. 
• Last week marked the worst start to a new year ever and the worst week for stocks in over four years. 
• If you look at the weekly chart of SPX going back to May 2014, there is not doubt a heavy amount of distribution unfolding in this market. 
• Plenty of gaps exist and waiting to be filled overhead. 
• Very careful trading in this market at this point in time. Take profits aggressively. 
• Potential head and shoulders pattern forming on SPY going back to November of 2014. Though a very sloppy one. 
• Lot of theories floats around January stock performance, from the first day, first three days, and first week of trading being a barometer for the returns of the rest of the year. I don’t put much weight behind these theories, and find them highly circumstantial.   

My Trades:

• Added two new positions to the portfolio yesterday. 
• Stopped out of SSO yesterday at $54.47 for a 2.6% loss. 
• Currently 40% long, 60% Cash
• I am open to the possibility of adding a new position at this point, but need to see that the market can sustain its morning gains first. 
• Join me each day for all my real-time trades and alerts in the SharePlanner Splash Zone

Chart for SPX: