Trading Plan for November 23, 2011

Economic Reports Due Out (Times are EST): MBA Purchase Applications (7am), Durable Goods Orders (8:30am), Personal Income and Outlays (8:30am), Jobless Claims (8:30am), Bloomberg Consumer Comfort Index (9:45am), Consumer Sentiment (9:55am), EIA Natural Gas Report (10:30am), EIA Petroleum Status Report (11am)

The Breakdown:

• Futures are significantly lower – about 1%.
• Don’t forget: Markets (except for futures) will be closed tomorrow and only open for a half day on Friday. 
• Asia traded mixed (though Hang Seng was down -2.1%), while Europe is trading down about -0.7%.
• Statistically speaking, the S&P is down 5 straight days, and 6 out of 7 days – which puts us down 6% during that time, and prime for a bounce in an oversold market. 
• All significant moving averages are above the current price action. 
• Nearest price-support level currently resides at 1120. 
• If the market can bounce off the closing price from yesterday, one could fathom that a bull-flag price pattern is being formed. 
• At this point, it is too late to positionally start shorting this market, the odds are stacked against you that you’ll be wrong, considering the move that we’ve already seen at this point. Wait for the market action to bounce and move higher first before adding new short positions. 
• Volume on the sell-off continues to taper off over the last three trading sessions.  
• Short-term we are well-oversold.
• Volume today will be extremely light as is the custom the day before Thanksgiving.
• 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: I believe that the market will continue to move lower, going forward in the intermediate-to-long-term. However, at this stage in the short-term, we are due for a significant bounce in equities, in order to get us out of oversold territory.