Trading Plan for November 21, 2011

Economic Reports Due Out (Times are EST):Chicago Fed National Activity Index (8:30am), Existing Home Sales (10am)

The Breakdown:

• Futures are significantly lower – nearly 20 points down. 
• Asia traded down between -0.3% and -1.4%, while Europe is trading down on average of -2.4%
• On Friday the market formed a nice doji candles which often times represents a stalemate between bulls and bears, but clearly that stalemate has been broken based on the open we are going to have today. 
• Based on the morning weakness, we should open well below the 50-day moving average, as well as break through the 1215 and 1206 support levels on the S&P. 
• Next support level comes in around 1190. After that there is little in the way going down to 1120. So yes, things could get very interesting here…very soon. 
• Volume has been increasing over the last 3 trading sessions while we’ve been selling off. 
• Short-term we are creeping into oversold territory. 
• We’re faced with a holiday week of trading so expect volume to be light and at times sporadic and unpredictable.
• Assuming this market decides to continue marching lower, you can expect a ton of rallies throughout, before it gets to where it’s 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: Pretty obvious here, you want to focus on the short side, ride the trend lower, and cover on increasing weakness throughout.