Today’s Trading Plan: How High Does the Dead Cat Bounce

Technical Outlook:

• Huge move on Friday following the negative interest rate announcement by the Bank of Japan, creating a 46 point move on SPX and a massive short squeeze as a result. 
• I still consider this bounce at this point to be a dead cat bounce with a ceiling of around 1990-2000. If this level breaks, you have a legitimate opportunity for the market to make a far bigger bullish move higher into the upper 2000’s. 
• 20-day moving average was recaptured for the first time this year on Friday. 
• SPY volume was much stronger than what we have seen of late and the highest since 1/20/16.
• SPX 30 minute chart shows a breakout of the 30 minute chart’s inverse head and shoulders pattern. 
• VIX only dropped 9.9% on Friday down to 20.20. Considering how elevated it was, I would have expected a bigger move, since the SPX moved 46 points. 
• T2108 (% of stocks trading above the 40-day moving average) popped 62% to close at 29.43. A very justified move that indicates that the market is no longer oversold as it once was. 
• USO actually wasn’t part of the rally on Friday, instead falling 1/2 percentage point. Additional weakness this weak will likely signal the end of the dead cat bounce for equities. 
• Confirming the head and shoulders pattern on the weekly chart of SPX/SPY will be critical for the bears if they are going to keep the downtrend going. 

My Trades:

• Closed out DCI at $28.30 for a 1.4% gain. 
• Covered IWM at $102.73 for a 3.2% loss. 
• Did not add any additional swing-trades to the portfolio. 
• Currently 100% Cash
• Staying light in this market is absolutely key. Strong bias at this stage is dangerous. 
• Join me each day for all my real-time trades and alerts in the SharePlanner Splash Zone

Chart for SPX: