Today’s Trading Plan: Taking the Elevator Up

Technical Outlook:

• Massive rally yesterday – the largest one since March 11th. 
• SPX reclaimed the middle band (20-day moving average). Also recaptured the 10-day moving average. 
• Despite a hard rally yesterday, the sell-off was still below recent averages. 
• SPX, since bouncing off of the lows Friday (and off of the 50-day moving average) price has rallied 45 points. 
• The 50-week and 100-week moving average have crossed last week to the downside. Last time this happened was 2001 before the tech correction and again in June 2008 before the mortgage crisis saw its major correction. 
• Despite a difficult start to the month of May, it is now trading in three green after the recent 3-day rally. 
• VIX continues to drop for a fourth straight day, losing 6.5% down to 13.63. Nearby, critical support likely to be tested. 
• Strong rally out of T2108 (% of stocks trading above their 40-day moving average) yesterday, rising 12.3% to 67%. 
• Right shoulder on SPX 30 minute chart still intact, going back to late-March. 
• The bears can’t afford for the bulls to run this market much higher and will need to reverse price action soon. 
• I believe at this point, profits have to be taken aggressively, and avoid the tendency to let the profits run – the market is in a very choppy range that has mired stock price for the past two years. Unless it breaks out of it and onto new all-time highs, then taking profits aggressively is absolutely important. 
• The number one objective for the bears coming into today is to break price back below last weeks lows of 2039. Do that and you have the head and shoulders pattern. 
• Next objective for the bulls is to break through 2100 price level and on to new all-time highs after that. 
• Historically the May through October time frame is much weaker than the rest of the year.

My Trades:

• Sold LNKD yesterday at $127.57 for a 2.8% profit (day-trade)
• Did not add any additional swing-trades to the portfolio yesterday besides LNKD trade.
• Currently 30% Long / 70% Cash
• Remain Long: JNJ at $112.65, AAPL at $92.79 and GM at $31.03
• Will look to add to my long exposure if the market can follow through on yesterday’s rally.
• Join me each day for all my real-time trades and alerts in the SharePlanner Splash Zone

Chart for SPX: