Trading Plan for Jan 26, 2011

Current Long Positions (stop-losses in parentheses): QID (10.49), SDS (22.29)

Current Short Positions (stop-losses in parentheses): T (28.74), EXPD (55.26), DKS (35.79)

BIAS: 28% Short (counting QID and SDS as shorts)

Economic Reports Due Out (Times are EST): MBA Purchase Applications (7am), New Home Sales (10am), EIA Petroleum Status Report (10:30am), FOMC Meeting Announcement (2:15pm)

My Observations and What to Expect:

• Futures are up moderately heading into the open. 
• Asian market returns range from -0.6% to 1.2% and European markets are trading with strength in excess of 1%
• The FOMC Statement to be released this afternoon, will dictate the ultimate direction of the market. 
• There has been a lot of sell-the-news reactions of late, especially when it comes to earnings. Watch the Fed Statement to see if there is a similar reaction. 
• The S&P broke below the 10-day moving average and lower band of the narrow, rising price channel on an intraday basis, but rallied in the final hour to reclaim those important price levels. 
• Dip buyers continue to provide incredible support to this market, where even the most solid of sell-offs get bought up in afternoon trading. 
• Volume was average yesterday. 
• Watch the highs on the S&P today, as a break of those highs would put the bear argument to rest in the short term. 
• We are poised to break the short-term intra-day price resistance on the S&P at 1291. 
• From a candle pattern perspective, the S&P and Nasdaq are putting in, what looks like, a bear flag pattern. 
• Nasdaq continues to look much weaker than the S&P and is running into resistance still at the 10-day moving average.
• In order for this market to see a correction at this point, the bears need to break the 20-day moving average on the S&P.
• Evening star formation from 1/17-1/19 should indicate at least a short-term top is in place in this market.
• 1261 represents the short-term ‘higher-low’ on the daily charts.
• For the bears – Simple – push the market lower, erase the early morning gains, and keep dip buyers from erasing the day’s losses.
• For the bulls – Break to new highs, and in particular 1300 on the S&P. 

Here Are The Actions I Will Be Taking:

• Will hold off adding any new short positions, until there is additional technical damage on these charts. 
• Watch to see if we close at recent highs. If  so, will likely close out remaining short positions. 
• Stopped out of AT&T (T) at $28.74 for a 2% loss on the trade. 
• Added two new short positions Expeditors International of Washington (EXPD) at $53.25 and Dick’s Sporting Goods (DKS) at $34.67. 
• Will begin shifting my focus to adding new long positions once the recent highs are broken. 
• Follow me in the SharePlanner Chat-Room today for all my live trades and ideas.