Today’s Trading Plan: China Sabotages Markets

Technical Outlook:

• Strong bounce yesterday that allowed SPX to recapture all of the major moving averages (5, 10, 20, 50). 
• However, China chose to devalue its currency last night and it has had a major ripple effect throughout global markets, as a large majority of yesterday’s market gains will be wiped out at the open. 
• This puts price action into the gap from yesterday for SPY. 
• The goal for the bears today will be to break and close below the 200-day moving average as well as below the 8/7 lows of 2067. 
• SPY volume yesterday was noticeably weak and well below average. 
• T2108 (% of stocks trading above the 40-day moving average) had one of its better showings, rallying 23% to 40%. 
• VIX dropped 8.6% down to 12.23. 
• First hour of trading will determine a lot of what this market intends to do today and whether the gap down will hold. 
• Large gap downs like this one is very difficult for the bears to sustain and often times will see the gap get filled on them. Don’t assume the market going down today is a sure thing and be very careful with chasing stocks to the downside today. 
• 30min SPX chart show how imperative that SPX holds last week’s lows at 2067. 
• My biggest ongoing concern with the market right now is the inability to establish new, clear-cut all-time highs that leads to an expansion of price as well. Instead SPX gets bogged down in the 2120-2130’s range and reverses course each time. 

My Trades:

• Added one new long position on Friday.
• Did not close out any positions yesterday. 
• 40% Long / 60% cash. 
• Remain long: FB at 94.71, MSFT at 47.48, UPRO at 67.39.
• The key today will be whether dip-buyers can stabilize this market and push it back up. 
• Join me each day for all my real-time trades and alerts in the SharePlanner Splash Zone

Chart for SPX: