Trading Plan for October 6, 2011

Current Bias: 100% Cash

Economic Reports Due Out (Times are EST): Jobless Claims (8:30am), Bloomberg Consumer Comfort Index (9:45am), EIA Natural Gas Report (10:30am)

My Observations and What to Expect:

• Futures are moderately higher this morning.
• Asia saw gains range from 1.5% to 5.7%. Europe is seeing strong gains of about 1.7%.
• S&P finally managed to close above the 10-day moving average, though barely. Previous four attempts resulted in failure each time. 
• 1158 on the S&P represents resistance in the form of a downward trend-line off of 9/20 highs. 
• Volume was dramatically less from the prior day. 
• Be cognizant of the move we have seen in the last 8 hours of trading (since Tuesday’s 3pm rally) we have rallied 70 points on the S&P. That is quite a bit and warrants caution on additional long positions being added. 
• 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.
• A lot of people calling for a bottom, but honestly, I believe the market has a lot to prove before that can be considered.
• As stated in previous trading plans “I don’t believe the S&P can ‘stair-step’ its way down, without subjecting itself to major bounces in the process.”
• Another poignant warning recently made “The market continues to act as a dangerous place for the passive trader. Intraday day whip-saws creates gains and erases them very quickly. Take the gains when you can.”
• 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 not buying into the bottom talk at this point. Market needs to prove it to me (not vice versa). I believe that this market will run out of steam yet again. 

Here Are The Actions I’m Taking:

• Traded Direxion Small Cap Bear 3x (TZA) and Direxion Small Cap Bull 3x (TNA). For some descent gains. 
• Will watch market action for the first 30min to 1 hour of trading before jumping into anything else.
• Follow me in the SharePlanner Chat-Room today for all my live trades and ideas (as well as everyone else’s).