Trading Plan for August 5, 2011

Current Long Positions (stop-losses in parentheses): QCOM Oct 60 Calls, AAPL Sept 420 Calls, SPY Aug & Sept 136 Calls

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

BIAS: 10% Long

Economic Reports Due Out (Times are EST): Employment (8:30am), Consumer Credit (3pm)

My Observations and What to Expect:

• Futures are moderately higher. 
• Asian markets were down between -3.1% and -4.3%, and Europe is down between -0.6% and -2.3%.
• Yesterday was one of the worst days for the US markets in years…literally. With the S&P down 60 points. 
• Support levels in this meltdown the markets have experienced over the last two weeks have been utterly useless as price continues to cut right through them. 
• The head and shoulders pattern on the S&P that has been talked about for some time, and was confirmed on Tuesday, has shed 71 points since confirmation occurred. 
• On H&S patterns, the length of the down turn is measured by taking the difference of the peak of the right shoulder and the neckline, and that is your target for a bottom. In this case, we are looking at aroughly 80-85 points of down side, so we are near the bottom in that regard.
• S&P is currently sitting on support from a trend-line that began in July ’09. Break it, and the next support level is the November ’10 support level. 
• We remain well outside the lower bollinger, for the third consecutive day. Typically this leads to strong bounces to the upside. 
• Volume continues to creep higher, NYSE had its biggest trading day of the year yesterday. 
• Hammer Candle from Wednesday, turned out to be a huge head-fake for bulls. 
• My Conclusion: It seems like an eternity now, but nonetheless, the market is due for a bounce, that should be very significant – particularly with the positive employment report. We are just about as oversold as we can be and well outside the lower bollinger band. 

Here Are The Actions I’m Taking:

• I will look to lighten the load on some of my positions that I currently have on any significant bounce today. 
• Will use the bounce to play some of the oversold stocks from the past few days. Good candidate for such is Caterpillar (CAT).
• But I will be careful about adding any new long positions to trade until about the first 30-60 minutes of trading. 
• 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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