Trading Plan for Jan 21, 2011

Current Long Positions (stop-losses in parentheses): QID (10.49)

Current Short Positions (stop-losses in parentheses): GLD (136.40), PII (75.36), T (28.74)

BIAS: 24% Short (counting QID as a short)

Economic Reports Due Out (Times are EST): None

My Observations and What to Expect:

• Futures are up moderately heading into the open. 
• Asian markets were mixed seeing returns of -1.6% up to 1.4%. European markets are trading on average up 1%.
• GOOG posted solid earnings yesterday, helping to lift the tech sector prior to the open. Watch for whether GOOG earnings becomes a “sell the news” event like what we saw in AAPL.
• Yesterday saw the S&P bounce exactly on the 20-day moving average and form a doji hammer on the charts, indicating that support may have been found, and the rally remains intact. 
• On the other hand, for the first time in 35 trading sessions, the S&P failed to close above the 10-day moving average. Last time this happened was 11/12 and we saw a significant short-term pullback in the markets. 
• A move to new highs in the market would effectively end, for now, any hopes the bears had of pushing this market lower, and instead would see more price expansion. 
• S&P managed to get its price back within the narrow, rising channel yesterday after falling below it for much of the trading day. 
• For resistance, I would continue to watch the upper line of the rising channel that we are seeing in the S&P (I’ll do a post on this later today), and and watch price action at the highs. 
• Evening star formation from 1/17-1/19 should indicate a short-term top in place in this market. 
• As you can see, there are a lot of mixed signals this market is giving off, and yesterday’s bounce off the 20-day MA, only added to that. We have seen, though, a number of “cracks” in the dam in recent days, that leads me to believe, that unless we can break recent highs,  to remain completely skeptical of any kind of upward momentum. 
• Volume continues to increase day-over-day. 
• On the intraday S&P charts (use 30min), the upward trend has been broken and a “lower-low” has been put in place – there is a clear downward trend on these charts, the question becomes where does a “lower-high” get formed, if this trend is to continue? I could see it logically happening between 1285 and 1289.
• 1261 represents the short-term ‘higher-low’ on the daily charts. 
• For the bears – Keep the intraday dip buyers on the sidelines, and nullify this doji hammer seen yesterday by pushing price below the 20-day moving average. 
• For the bulls – Move as quickly as possible to make new highs in this market at 1297. Until that happens, there will be a lot of skepticism regarding whether this market rally is still intact. 

Here Are The Actions I Will Be Taking:

• I will be very cautious about initiating trades in either direction. Market is on shakey ground, and determining direction at this point is a difficult task. 
• May relegate myself to day-trading different opportunities as they arise. 
• I will need to see further breakdown in this market before initiating any new short positions. 
• Added 2 new short positions to the portfolio yesterday: PII at $73.23 and T at $28.22.
• Added one long position (ultrashort ETF): QID at $10.86
• Covered my position in GLD yesterday at $131.28 for a 1.6% return.
• Follow me in the SharePlanner Chat-Room today for all my live trades and ideas.