Today’s Trading Plan: Bulls Look to Attempt Another Bounce Today

Technical Outlook:

• Another massive sell-off on Friday that sent the market spiraling into correction territory. 
• Volume in SPY was the highest level seen since the bottom of the August sell-off in 2015.
• SPY is sitting on the neckline of a massive head and shoulders pattern going back to May of 2014. 
• SPX will once again attempt to get back above the 5-day moving average and if it can hold, the key will be whether it can provide some follow through to the upside, which will be key to this oversold bounce rally. 
• Establishing a higher-high on the SPX 30 minute chart will be key. A break of 1935 will be necessary to establish that. 
• A dead cat bounce could easily take us up to 2000 in short order on SPX without violating the longer-term bearishness of this market. 
• VIX rose over 30 intraday on Friday, and closed at 27.02 for a rise of +12%. 
• T2108 (% of stocks trading above their 40-day moving average) reached the lows associated with major market bottoms on Friday (5.81%). 
• Oil and China showing some willingness to bounce today and should lead to at least a temporary bottom in the current market. 
• 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. 
• 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. 
• So far this is the worst start to a new year of trading since the Great Depression
• 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. 
• 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:

• Did not add any new swing-trades to the portfolio on Friday.
• Closed out four long positions on Friday. 
• Currently 10% long, 90% Cash
• I am looking to play today’s bounce to the long side by adding 2-3 new positions today. 
• Join me each day for all my real-time trades and alerts in the SharePlanner Splash Zone

Chart for SPX: