Today’s Trading Plan: Tis The Season For Bouncing

Technical Outlook:

• A wild morning in trading that saw the market seesawing 20 points within minutes in both directions, ultimately led to a quick sell-off and then even bigger bounce. 
• As a result, SPY has formed the ideal bottom candle that is in the shape of a hammer. If you look back at many of the bottoms following heavy sell-offs, this particular candle has showed up in a majority of the lows of the sell-offs. 
• Volume, though lower than the readout on Friday, was still extremely high and well above average levels. 
• SPX managed to bounce off of the low 1990’s level which is where the August-October double bottom pattern confirmed at. This should be considered a strong level of support going forward. 
• There is a very good chance that this is the beginning of the so called, “Santa Rally”. Especially with yesterday’s bounce coming off of very extreme, oversold conditions. 
• SPX 30 minute chart shows a possible base forming, but in order for its chart to improve dramatically, it needs to rally over 2067 and establish a new higher-high. 
• 1993 is the key level that the bulls must defend today . Otherwise, a break of this level could lead to additional selling going forward. 
• Also, getting back above short-term support at 2019 was a key for SPX. 
• At this point though, SPX remains below all the key moving averages. 
• A very large range yesterday in VIX as it was as high as it got as high as 26.81 and finished the day 6.8% lower at 22.73. 
• Despite yesterday’s rally off of the loses, A/D still showed decliners with a decisive advantage at nearly 3-to-1.
• A a massive doji on T2108 yesterday and it finished 6% lower at 16%. 
• S&P 500 has followed a similar path to that of 2011, in fact it is eerily similar with both sell-offs being  within 3 points of each other in terms of sell-off depth. 
• 2011 ripped higher following this sell-off for the remainder of the year. 
• 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”.

My Trades:

• Added two new long positions to the portfolio yesterday. 
• I will consider adding 1-2 new positions today if the market can avoid another sell-off and hold the pre-market strength being seen here. 
• 50% Long / 50% Cash
• Remain long: MSFT at $54.81 and four other positions. 
• Join me each day for all my real-time trades and alerts in the SharePlanner Splash Zone

Chart for SPX: