Today’s Trading Plan: Low Volume Rally Potential

Technical Outlook:

• SPX provided strong follow through yesterday, bouncing back and reclaiming the 5 and 10-day moving averages. 
• A test of 2076, the peak of the lower-high that was previously established could be challenged with a massive move today, but a more likely scenario would be 2061 that represents the convergence of the 50 and 200-day moving averages, which has just recently formed the “Golden Cross” (more on that below). 
• Expect volume to continue dropping off as we get closer to Christmas. Tomorrow the market is open only until 1pm and closed on Friday. 
• Key support for SPY continues to rest right at the 200.00-level. A price point that has been tested and held 3 times in the past 2 months. 
• Volume, surprisingly, increased on Tuesday, and finished just a shade below recent averages. 
• VIX dropped 11% yesterday to finish at 16.6. Another move of 12% or more would push VIX below 14.63 and create a lower low for the first time since October. 
• Another strong move of 23 points to push the T2108 (% of stocks trading above the 40-day moving average) up to 28%. 
• There is a rising trend-line off of the September lows on SPX that has been tested twice in the past two weeks and held up perfectly. 
• For the bears, still the #1 objective is to kill this 2-day rally and drive price back down below the lows from last week of 1993. 
• Remember, time last week, the market was bouncing very hard and showing all the signs of a move back above 2100. So remain very skeptical of the current market environment. 
• Of late, there has been quite a bit of volatility in the last hour of trading – the final 30 minutes in particular. 
• SPX, on the 30 minute chart formed a nice base and broke out of that base yesterday at 2024. 
• This week and next represents the two best back-to-back weeks of trading in the market from a historical stand point. 
• 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. 
• 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”. In order for that to happen again, SPX would need to push above 2050 and remain there through year-end. 

My Trades:

• Added two new long positions to the portfolio yesterday. 
• Closed out GOOGL at $766.28 for a 0.3% gain. 
• I am looking for continued follow through to yesterday’s strength, to add new positions to the portfolio. 
• Currently 40% Long / 60% Cash
• Join me each day for all my real-time trades and alerts in the SharePlanner Splash Zone

Chart for SPX: