Trading Plan for October 12, 2011

Current Bias: 15% Short

Economic Reports Due Out (Times are EST): MBA Purchase Applications (7am), FOMC Minutes (2pm)

My Observations and What to Expect:

• Futures are up about 1% heading into today’s open. 
• Asia traded in a mixed fashion, while Europe is up overall about 1%. 
• S&P is poised to open up at a resistance level this morning that has marked the turning point to the downside each of the last two times it has been tested. Resistance is at 1209 – (see the chart below).
• If the S&P can rally an additional 15 points, to 1209, would mark an ideal level to begin re-shorting this market in a significant way. It marks the resistance lined formed by connecting the highs of other recent highs, and where the market began going south again at.
• If we can close above the aforementioned resistance level, there is a good chance, that the year’s bottom is in place, and perhaps even see a “Santa”-type of rally. 
• Careful with chasing this market at these levels – we are extremely overbought in the short-term heading into significant resistance. 
• The past couple of weeks reminds me of late 2008, when the market would experience a series of massive sell-offs followed by a significant rally or two.
• 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: No way am I buying this market until we get some kind of pullback in the short-term. Don’t chase this market. 

Here Are The Actions I’m Taking:

• Traded TNA, TZA yesterday with little success. Held PXD and SBGI overnight. 
• Will continue to trade TZA and TNA, but also look to short some breakout plays as well that start to falter early on.
• I’m looking to take advantage of the market possibly being weak today, and will focus on the short side of the trade.
• Follow me in the SharePlanner Chat-Room today for all my live trades and ideas (as well as everyone else’s).