Trading Plan for August 8, 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): None

My Observations and What to Expect:

• Futures are much lower, to the tune of more than 2%
• Asian markets were down of -2%, while Europe is down between -0.5% and -2.1%
• Friday as an incredibly volitile session, ending with the highest volume level on the S&P in over a year. 
• We also closed Friday with one of the biggest doji candles that I have ever seen – a 50 point range that closed only 1 point lower than its open – Incredible. 
• Large volume spikes like what we saw on Friday, often market the change of market direction. Check out 6/24, 3/16, and 11/30
• S&P continues to hold the trendline for the second consecutive day – a trendline that began on the lows of July 2009. 
• We also managed to hold the lows of last November – dropping down to those levels and then rally back higher. 
• First thing on the agenda for the bulls will be to push back above the 1275 level and then the 1286 level, representing the 200-day moving average. 
• S&P downgrade will be front and center tomorrow and the effect that it will have on the debt instruments. 
• Be very, very, very aware of the possibilities of central banks world-wide and the news they may generate tomorrow. 
• Fed meets on Tuesday, and that provides another great central bank market booster possibility. 
• A lot of talk about ECB buying up a lot of Italian and Spanish debt this week. 
• When we take this big of a hit, you can always count on the Fed and other central banks to come up with something to at least temporarily boost the markets. Don’t fight it when it happens. 
• Beyond last November’s lows, we could see some support come in from last summer’s highs around 1128. 
• 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, which was more than completed/reached based on the intraday-lows from Frinday. 
• We remain well outside the lower bollinger, for the fourth consecutive day. Typically this leads to strong bounces to the upside.
• My Conclusion: Some new events to watch that could reverse the markets: drastic action taken by the Fed on Tuesday’s FOMC statement and ECB intervention in the Italian and Spanish debt crisis taking place – that said, markets will reverse at some point, and Friday’s volume spike indicated that it could take place beginning this week. 

Here Are The Actions I’m Taking:

• I’m not expecting to make a big splash with any additional long positions today. Instead will wait for the market to bounce significantly before adding new positions. 
• Will look to unload a number of my options positions this week should the market 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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