Today’s Trading Plan: Does The Rally End Here

Technical Outlook:

• SPX gapped and ran hard yesterday back above 1972 resistance and is nearly 2000 again. 
• Late day antics saw SPX drop 40 points two hours prior to the close, only to rally back 40 points in the final hour – insanely volatile and not indicative of a healthy market. 
• At this point, I suspect that the dead-cat bounce is going to show signs of running out of steam. 
• When this happens, I’ll be expecting another leg down in the market. 
• Volume on this bounce remains well above average but continues to drop for a third consecutive day on SPY. 
• I don’t see this rally going any higher than 2046. 
• VIX dropped another 13.9% yesterday down to 26.10. A large drop from the intraday highs seen on Monday. 
• Another big leap in T2108 (% of stocks trading above their 40-day moving average) jumping 65% to 15.9%. 
• The major intraday swings in both directions makes taking on legitimate swing-trades to be very difficult. Much of my trading has shifted over to day-trading ETFs. 
• 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. 
• 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 rates in September – possibly not even this year.

My Trades:

• Did not add any new swing positions yesterday. 
• Did not close out any swing positions yesterday. 
• Shorted SPY yesterday as a day-trade for a 1.1% loss. 
• 100% cash
• We have a bounce that is underway, with the rally of the last two days. Ultimately I think it will prove to be an opportunity to short. 
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Chart for SPX: