Today’s Trading Plan: Day Two of the Bounce

Technical Outlook:

• One of the largest bounces the market has ever seen unfolded yesterday, sending SPX back above 1900 to 1940. 
• These dead cat bounces can easily last 2-3 days before the selling resumes. 
• Here is what you should be asking yourself – in six days, SPX drops 234 points non-stop – over 10%. Are we really to assume the sell-off is now over in just six days and we are all going to be back on the road to new all-time highs? I think not. 
• SPX looking to break above the 5-day moving average today at the open. 
• Volume on on SPY remains extremely elevated, but has faded over the previous two trading sessions. 
• Volatility continues to drop, but remains quite elevated at 30.32. It dropped yesterday 15.8%, which considering the amount of yesterday’s rally, would have seen a bigger drop. 
• T2108 (% of stocks trading above the 40-day moving average) saw a 59% increase to 9.7% – not unusual to see such large rallies when the indicator is at such a low reading. 
• Potential base forming on SPX 30 minute chart – a move over 1954 would be considered significant and could lead to the market rallying further from here. At the moment SPX is poised to open above this level. 
• Still the objective for the bears will be to 1) resume the downtrend and stop the dead-cat bounce 2) Break below the October 2014 lows of 1820. 
• 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. 
• The current market conditions makes it very difficult to swing-trade positions overnight simply because the risk cannot be contained with the trade parameters. That doesn’t mean that I won’t consider holding a position overnight, but it has to be aligning well technically. 
• It stands to reason at this point that the Fed will not raise rats in September – possibly not even this year.

My Trades:

• Bought SDS yesterday at $54.29 and sold it at $54.73 for a 0.8% gain. 
• Did not add any new swing positions yesterday. 
• Did not close out any swing positions yesterday. 
• 100% cash
• We have a bounce that is underway, with yesterday’s rally. Ultimately I think it will prove to be an opportunity to short. 
• Join me each day for all my real-time trades and alerts in the SharePlanner Splash Zone

Chart for SPX: