Trading Plan for Jan 12, 2011

Current Long Positions (stop-losses in parentheses): BZ (8.10), MI (6.85), MWV (26.37), CLMT (21.53), MMM (85.55), ALKS (12.17)

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

BIAS: 35% Long

Economic Reports Due Out (Times are EST): MBA Purchase Applications (7am), Tim Geithner Speaks (8:30am), Import and Export Prices (8:30am), EIA Petroleum Status Report (10:30am), Beige Book (2pm), Treasury Budget (2pm)

My Observations and What to Expect:

• Futures are showing moderate strength heading into the open.
• Asian markets and European markets are both showing a solid amount of strength in trading today.
• 1278 is becoming a strong short-term resistance level on the S&P. 
• Today’s strength has us opening up at the 1278 level. 
• Ideally, it would be goods if we can gap above that price level because then that resistance level would act as support going forward. 
• Like what we saw yesterday, a failed test of recent highs could create a strong intra-day reversal.
• A strong rally today, especially one that takes us into the outer edges of the bollinger bands, would be a good reason to do some profit taking, which would be in the mid-1280’s. 
• Continue to watch the market’s relationship with the 10-day moving average, as the support level is becoming increasingly vulnerable over the past three days. Should we end up closing below the 10-day, watch how the market responds to the 20-day moving average, just underneath it.
• The creation of a “lower-low” in this market would be if there is a break below 1251 and would essentially stall the trend out.
• Yesterday showed that dip-buying continues to persist, and that the bears do not have enough selling power, to get past it at this point.
• The more long-term trend-line dating back to 9/1 currently has support at 1234.
• For the bears – Do not let the bulls close above 1278. Doing so would likely create a move even higher. 
• For the bulls – Close above 1278, and establish a new higher-high in this market. 

Here Are The Actions I Will Be Taking:

• Could add 1-2 new positions to the portfolio today
• Raised the stop-loss in BZ.
• Sold MI for a 1% gain after it failed, to make any substantial move in the market. Will consider adding again once it breaks out again. 
• Added ALKS and MMM to the portfolio today. 
• Follow me in the SharePlanner Chat-Room today for all my live trades and ideas.