Today’s Trading Plan: Market Fear or Opportunity

Technical Outlook:

• Potential bounce opportunity on Friday was entirely squandered and the bears managed to drive price down more than 1% yet again. 
• Last week marked the worst start to a new year ever and the worst week for stocks in over four years. 
• If you look at the weekly chart of SPX going back to May 2014, there is not doubt a heavy amount of distribution unfolding in this market. 
• Crude is currently trading 2% lower this morning in the $32’s. Multiple bounce attempts continue to get sold as soon as the rip higher occurs. 
• The same has been the case with SPY during the course of the last four trading sessions as every attempt to rally off the lows, or early morning strength is quickly sold off the same day. Overnight futures trading has seen that to a certain degree was well. 
• VIX ripped 8% higher on Friday, rallying up to 27 and above resistance at 26.34. 
• T2108 (% of stocks trading above the 40-day moving average) has broken rising support off of the August lows. It is now in the lower teens where according to the weekly chart is where six out of the last seven bounces have taken place (excluding August lows that went much, much lower). 
• SPY volume was slightly less on Friday than the reading from the day before, but still it was well above recent averages. 
• Plenty of gaps exist and waiting to be filled overhead. 
• A market bounce, and yes, we are extremely overdue for one, could easily take price 80-100 points higher, which in my opinion would be idea for shorting the market again. 
• If today’s market gives up the pre-market gains again, SPX stand the possibility of losing 1900. 
• Rising support off of the February 2014 lows suggests a possible bounce off of support at 1901. 
• 30 minute chart of SPX shows hardly a single bounce even on the intraday charts. 
• China finished lower last night – dropping 5%.
• Very careful trading in this market at this point in time. Take profits aggressively. 
• The major moves in the indices are taking place while the market is closed. 
• Gap risk is a significant issue right now for traders. There is just as much of a chance of waking up to /ES futures being up 30 points as there is having /ES futures being down 30 points.
• Extremely volatile market conditions right now; entry timing at this stage is very difficult and very essential to successful trading when this unpredictable. 
• Potential head and shoulders pattern forming on SPY going back to November of 2014. Though a very sloppy one. 
• Lots of theories floats around January stock performance, from the first day, first three days, and first week of trading being a barometer for the returns of the rest of the year. I don’t put much weight behind these theories, and find them highly circumstantial.   
• January has been a very volatile month in recent years to trade. Careful navigating it. 

My Trades:

• Added one new position to the portfolio on Friday. 
• No swing trades to sell on Friday. 
• Currently 10% long, 90% Cash!
• I will look to play the market in either direction today where a solid edge can be gained and traded favorably. 
• Join me each day for all my real-time trades and alerts in the SharePlanner Splash Zone

Chart for SPX: