Trading Plan for November 16, 2011

Economic Reports Due Out (Times are EST): MBA Purchase Applications (7am), Consumer Price Index (8:30am), Treasury International Capital (9am), Industrial Production (9:15am), Housing Market Index (10am), EIA Petroleum Status Report (10:30am)

The Breakdown:

• Futures are down about 1% heading into the open. 
• Asia was down about 1.4% on average, while Europe is trading in mixed fashion. 
• Not much change in the state of market from yesterday. We remain firmly entrenched in the ever-tightening triangle price pattern.
• If we get a move below 1234 today, that would effectively put us below the consolidation/triangle that we’ve been trading in the past few weeks.
• 1267 on the S&P would represent the upside breakout.
• The wedge that we are currently trading in, represents the #1 market variable 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 1234, pay close attention to 1215. Break this key support level and fear will rapidly pick up across Wall Street.
• We almost filled the 11/11 gap up yesterday but not quite. 
• Volume remains non-existent over the last 4 trading sessions. It should pick up once we break out of consolidation. 
• We are close to seeing 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 skeptical that the market has enough mojo for an upside breakout, I still expect us to see the market break down out of consolidation.