Trading Plan for November 15, 2011

Economic Reports Due Out (Times are EST): ICSC-Goldman Store Sales (7:45am), Producer Price Index (8:30am), Retail Sales (8:30am), Empire State Manufacturing Survey (8:30am), Redbook (8:55am), Business Inventories (10am)

The Breakdown:

• Futures are down moderately ahead of the open. 
• Asia was down over -0.7% in trading, while Europe is currently trading down between -0.6% and -1.6%. 
• If we get a move below 1233 today, that would effectively put us below the consolidation/triangle that we’ve been trading in the past few weeks. 
• 1270 on the S&P would represent the upside breakout. 
• The wedge that we are currently trading in, represents the #1 market variables to be keeping our eyes on. Inside of the wedge, the price action is meaningless. Outside of it, you have clear direction for trading. 
• Support was found at the 20-day MA yesterday and we remain just on top of it and the 10-day MA today. 
• After 1233, pay close attention to 1215. Break this key support level and fear will rapidly pick up across Wall Street. 
• We are currently trading right in the middle of the gap up from the 11/11 open (See SPY intraday). We should come close to filling it, if morning weakness holds up. 
• Volume remains nearly non-existent. 
• In the very short-term, we’ve managed to work off the overbought nature of the market.
• Intermediate and long-term, we are still overbought.
• Likely will see a 10-20 day MA negative crossover. Last time this happened (back on 9/20) we saw a significant amount of selling that ensued over the next couple of weeks.
• Even if this market decides to continue marching lower, you can expect a ton of rallies throughout, before it gets to where its going to settle. If you can stomach those rallies…fine. If not, you need to become a pro at consistently covering in weakness.
• Worth noting as well, is the obvious head and shoulders pattern forming on the weekly chart. Should this be the case, I’d expect then that this market is reaching a short-term top very fast.
• Make sure that whatever you do, that you protect the gains that you have, and be ready for sudden and quick reversals in this market.
• My Conclusion: I’m pessimistic on the market in all time frames at this point. Bulls are quickly becoming disenchanted with this market, which will offer the bears a great opportunity to strike again.