Today’s Trading Plan: Market Needing A Bounce of Any Kind

Technical Outlook:

• After erasing all of the morning gains, the market went red before, once again finding some room to rally into the close. 
• The bears, even at these levels are still trying to aggressively short the market, which will ultimately lead to a massive short squeeze. At this point, getting short makes absolutely no sense, and are better off waiting for the relief rally to take place before trying to short this market again. 
• I am looking for a rally to take price on SPX as high as 1990-2010. I’ve also laid out a few alternative possibilities in this post from last night. 
• Oil (/CL) dipped below $30/barrel momentarily yesterday, and that was where it appeared the bears decided to cover their short positions, as it has managed to rally from that key psychological level. 
• As oil goes today, so will the rest of the market. Oil has a serious stranglehold on day-to-day price action.  
• SPY volume continues to decrease from a day-to-day basis, for the third straight day. Overall though it is still above recent averages. 
• SPX closed just a shade below the 5-day moving average and poised to break above it this morning, in doing so, it would be the first time the index has traded above it since the 12/29 – right before the 8-day sell-off commenced. 
• I will be thoroughly surprised here if we don’t get a legitimate bounce. Even the candles from the last two days on SPX are indicative of such. 
• VIX continue to drop off from its recent highs now back down to 22.47 after dropping 7.5%. 
• T2108 (% of stocks trading above the 40-day moving average), despite two green candles in a row on SPX, is still putting in red candles for the 8th time in the last nine trading sessions. This can be explained by the horrible breadth in the market yesterday, in which a majority of the stocks on the NYSE were unable to be part of the rally. 
• SPX 30 minute chart has established a higher-low, and closing in on a higher-high but will need to clear 1947 in order to do so. 
• Trend-line off of the February 2014 lows shows a perfect market bounce off of the rising support level. This is best seen on the weekly chart. 
• The same banks that are right now calling for $20 oil are the ones just a few years ago saying that we’d be trading over $200/barrel right now. 
• Look for earnings to play a far greater role this quarter on market direction as the initial Fed rate hike is now in the rear view. There are a lot of concerns out there that earnings will be weak across the board. 
• 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. 
• Plenty of gaps exist and waiting to be filled overhead. 
• 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 in both directions is a significant issue right now for traders. 
• Potential head and shoulders pattern forming on SPY going back to November of 2014. Though a very sloppy one. 
• Lot 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 three new positions to the portfolio yesterday. 
• Sold AAPL at $99.21 for a 0.7% gain. 
• Sold DIS at 101.00 for a 1.1% gain. 
• Sold SSO at 55.94 for a 1.0% gain. 
• Currently 30% long, 70% Cash
• If the market can hold the day’s gains, I will look to add 1-2 two new positions to the portfolio. 
• Join me each day for all my real-time trades and alerts in the SharePlanner Splash Zone

Chart for SPX: