Today’s Trading Plan: Bear Flag Confirmation

Technical Outlook:

• Extreme low volume bounce yesterday on the SPY that resulted in an open and close at the same exact price (doji candle). 
• Today’s gap down takes SPX puts price at around the 9/10 lows. 
• Bear flag pattern is to confirm today at the market open on SPX (see chart below). 
• VIX continued its pullback yesterday dropping nearly 10% to close at 20.14. 
• T2108 (% of stocks trading above the 40-day moving average) is showing signs of looking “toppy” as it is struggling to sustain its upward momentum. 
• SPX to drop below the 10 and 20-day moving averages at the market open. 
• With the break of the bearish flag that has been forming there are two price targets: 1) The 1904-1911 range, followed by a retest of the 1867 lows of August. 
• Seasonally speaking, this week and the two weeks that follow are considered the weakest trading periods of the year. 
• The bulls are going to need to quickly get a hold of this market early on to avoid a significant sell-off today. Look for whether the dip buyers emerge in the first hour of trading or not. 
• For swing-traders the gains/losses are made overnight night and you have to be willing to hold overnight in order to profit. 
• I don’t expect the Fed at any point this year to raise rates now. Not next month, and very unlikely in the middle of the Christmas season. 
• Furthermore the Fed has never raised interest rates at a point where the market was trading lower on the year. 
• The large gaps in the market, the record number of stock buybacks, and ETFs that are constantly accumulating/dumping large chunks of stocks, and most importantly the high frequency trading, shows just how illiquid this market has become in recent years. These entities are the most responsible for the massive market swings that stocks incur each day. 
• This market is one that seeks to fill traders with regret, whether it be for selling too early, selling to late, not being long enough, not being short enough. That kind of regret will manipulate you into trading in a manner that will bring ruin upon the capital in your portfolio. 
• Trade nimble, be careful about holding positions overnight, because the volatility is still at extreme levels and much of the daily moves are happening before the market ever opens. 

My Trades:

• Added two new short positions to the portfolio yesterday. 
• Did not close out any swing-trades yesterday. 
• 20% Short / 80% Cash
• Early morning strength, if it holds, drastically changes the personality of the S&P 500 going forward, with a resumption of the downtrend. 
• Join me each day for all my real-time trades and alerts in the SharePlanner Splash Zone

Chart for SPX: