Today’s Trading Plan: Setting Up To The Downside

Technical Outlook:

• Rare day yesterday that saw a huge gap up sell-off and finish almost 30 points lower on SPX. 
• The entire range of the selling from highs to lows represented a +50 point move. 
• To close the day, SPX had 7 straight red bars on the 30 minute chart. Considering we are not looking at a major gap at the opening, I wouldn’t be surprised to see some strength initially, only to be faded later on by the market. 
• SPX stuck still in a triangle pattern that has been marked by higher-lows and lower-highs. A move below 1910 for the bears would break price out of this pattern, and a move above 1993 for the bulls would do the same. 
• Strong rejection at the 20-day moving average yesterday. Very much worth keeping an eye on going forward. 
• SPX on the 30 minute chart failed to do anything with the double bottom I spoke of yesterday. Instead, today it has a double top worth noting. A move below 1911 would confirm the pattern. 
• SPY volume was stronger than what we saw on Monday but only average overall. 
• It is the gaps that are really standing in the way of swing-traders right now. When you have an equal number of monster gap up/down from a day-to-day basis, the penalty for being on the wrong side of the trade is greatly intensified and creates a high-risk environment that is not conducive for overnight holds. 
• The large gaps in the market, the record number of stock buybacks, and ETFs that are constantly accumulating/dumping large chunks of stocks, and most importantly the high frequency trading, shows just how illiquid this market has become in recent years. These entities are the most responsible for the massive market swings that stocks incur each day. 
• This market is one that seeks to fill traders with regret, whether it be for selling too early, selling to late, not being long enough, not being short enough. That kind of regret will manipulate you into trading in a manner that will bring ruin upon the capital in your portfolio. 
• Trade nimble, be careful about holding positions overnight, because the volatility is still at extreme levels and much of the daily moves are happening before the market ever opens. 

My Trades:

• Added one position to the portfolio yesterday as an ETF short. 
• Did not close out any positions yesterday. 
• 10% Short / 90% Cash
• I’m looking for additional downside out of the market today and the possibility that SPX tests last weeks lows and in the process of doing so, I would add 1-2 more short positions to the portfolio. 
• Join me each day for all my real-time trades and alerts in the SharePlanner Splash Zone

Chart for SPX: