Trading Plan for February 9, 2011

Current Long Positions (stop-losses in parentheses): QID (9.99), TWM (11.39)

Current Short Positions (stop-losses in parentheses): LSI (6.53), GLD (133.67), SNDK (49.80)

BIAS: 35% Short (counts QID & TWM as a short)

Economic Reports Due Out (Times are EST): MBA Purchase Applications (7am) Bernanke Speaks (10am), EIA Petroleum Status (10:30am)

My Observations and What to Expect:

• Futures are slightly red heading into the open.
• Asian markets had some weakness overnight with Hang Seng seeing declines of 1.4%. European markets are trading flat. 
• One thing I want to highlight more than anything is the weakening volume on the S&P over the last eight sessions – huge concern for the bulls in  keeping this market propped up. 
• S&P finished yesterday’s market session extended well outside the upper Bollinger Band and very near the upper-channel line which is around 1328.  
• Looking at the intrday 30-min chart on the S&P, very strong rally off of the lows from 1/28. Support sits at 1320.
• These low volume  levels are a bearish divergence, coupled with some of the price patterns/candle patterns, indicates the market is on very unstable ground, despite the gains we have seen of late and may be rallying on fumes at this point.
• S&P 10-day moving average continues to provide support in the short term, once tested, triggers the dip buyers to flood the market and erase any weakness.
• Three support levels to watch on the S&P (as of Tuesday’s Close): 1303 (10-day MA), 1294 (20-day MA) and 1290 (Rising trend line off 9/1 lows). Break of all three of these including at the close, results in a very bearish shift in sentiment.
• For the bears – Figure out how to execute a sell-order
• For the bulls – Make a run at the upper channel and break through it, in order that further price expansion can occur, and then you also expand the price channel range that the market is trading within. 
• My conclusion: At the risk of being made a fool by this market, I continue to reiterate my analysis that the upside, at least in the short-term is greatly limited by this market. The likelihood we see a sell-off this week is still very probable.

Here Are The Actions I Will Be Taking:

• Shortd SNDK at $49.80, tried earlier at $49.35 but got stopped out at $50.15. 
• Still building my DIA Puts position.
• Will be cautious about adding any further short positions to the portfolio at this juncture. Will wait for some technical barriers to break first.
• Follow me in the SharePlanner Chat-Room today for all my live trades and ideas.