Today’s Trading Plan: Fed In The Rearview

Technical Outlook:

• The Fed yesterday came through on what was widely expected and that was a 1/4 point rate increase. The market subsequently rallied hard thereafter. 
• With yesterday’s monster rally, SPX managed to reclaim every major moving average including the 10, 20, 50 and 200-day moving average. 
• A lot of talk about the “Golden Cross” taking place on SPX with the 50-day moving average crossing above the 200-day moving average. I don’t put much weight behind this phenomenon. 
• Volume was extremely strong yesterday on SPY and much higher than what we saw the previous two days – and almost as high as the volume levels reached on Friday. 
• So far SPX has rallied 80 points off of the lows – often times it is very possible to rally well over 120 points before running into any heavy resistance. 
• Also, based on the behavior of the intraday action, it doesn’t look like the shorts have really been pressed into closing out of their short positions – i.e. they haven’t been squeezed quite yet. 
• The key for today is for the bulls to break above 12/1 at 2101. If that happens, there is a higher-high that finally forms on the market that hasn’t been seen since October. 
• VIX continues to collapse, dropping another 15% down to 17.86. 
• T2108 (% of stocks trading above the 40-day moving average) increased 40 points (huge move!) to 30%. Even with the huge move in this indicator, it is still well oversold with plenty of room to run. 
• Despite a strong 3-day rally, the market is no where near being overbought at this point. 
• SPX broke out of its bull flag pattern on the 30-minute chart. 
• Island reversal pattern has formed on the daily SPY all the way down to the 1 minute chart. This is a very bullish pattern for the market and could very well mark the bottom to the recent selling. 
• S&P 500 has followed a similar path to that of 2014, in fact it is eerily similar with both sell-offs being  within 3 points of each other in terms of sell-off depth. 
• 2014 ripped higher following this sell-off for the remainder of the year.
• Also an interesting analog for 2015 has been its similarity to 2011 price action.
• For twelve years straight, the market over the course of the last 30 trading days of the calendar year, has yielded a net positive gain, and thus reinforcing the concept of the “Santa Rally”.

My Trades:

• Closed out BIDU yesterday at $199.90 for a 0.4% gain. 
• Added two new long positions yesterday. 
• I will consider adding 1-2 new positions today if the market can continue this three day bounce. 
• 60% Long / 40% Cash
• Remain long: MSFT at $54.81, BDX at $154.94, UPRO at $59.88 and four other positions. 
• Join me each day for all my real-time trades and alerts in the SharePlanner Splash Zone

Chart for SPX: