Trading Plan for August 17, 2011

Current Long Positions (stop-losses in parentheses): QCOM Oct 60 Calls, AAPL Sept 420 Calls, Sept 124

Current Short Positions (stop-losses in parentheses): None

BIAS: 8% Long

Economic Reports Due Out (Times are EST): MBA Purchase Applications (7am), Producer Price Index (8:30am), EIA Petroleum Status Report (10:30am)

My Observations and What to Expect:

• Futures slightly higher heading into the open. 
• Asian markets trade in another mixed/flat session as does Europe.
• Yesterday was marked by intraday whip-saw action, which was buoyed by the Sarkozy/Merkel meeting the yielded nothing positive for the markets. 
• S&P managed to hold the 10-day moving average near perfectly. I am still looking for a 1-2 day move that pushes the S&P higher, now that we confirmed the move above the 10-day MA yesterday. 
• There will likely be some moderate weakness on the underside of the old trend-line that was began off of the July ’09 and was broken finally on 8/4/11
• Could also find some resistance around 1226 as well which would be the underside of the descending channel the market had been trading in since mid-April and broken on 8/4 as well. 
• Volume was very light yesterday, equal to the reading that we got on Monday. 
• Bears continue to seem ‘unphased’ by the recent push higher in equities, as they can be seen on the tape trying to short nearly every rally. I don’t believe that we’ve seen a significant short covering at this point, which leads me to believe there could be another big rally like we saw last week left in this market. 
• The 50-day and 200-day moving average downside cross over, is often a bullish signal despite popular belief of the exact opposite. Here is my backtest of this phenomenon.
• A break below 1120 on the S&P would indicate a new leg down in this nasty downturn that we’ve experienced.
• If this is only a dead cat bounce, we’ll likely  see this market only move somewhere between 1220 and 1260 before facing renewed selling pressures.
• Max pain scenario for the bulls and bears would be a run to new recovery highs (though we are no where near this) – bears would lose their profits, and many bulls would be stopped out and miss out on the rally due to the huge sell-off that we’ve had.
• My Conclusion:  With yesterday’s consolidation near the highs, might be worth adding a few starter positions to the long side, to see if you can benefit from additional strength in the markets. 

Here Are The Actions I’m Taking:

• I’ll begin putting on some starting positions with a push higher off of the 10-day MA. 
• Will look to unload a number of my options positions this week should the market continue to spike higher.
• Follow me in the SharePlanner Chat-Room today for all my live trades and ideas (as well as everyone else’s).

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