Trading Plan for September 13, 2011

Current Long Positions (stop-losses in parentheses): QCOM Oct 60 Calls, SDS (22.90) ~ Inverse of S&P

Current Short Positions (stop-losses in parentheses): BKU (23.65), VIP (10.68), OZM (10.31), BSX (6.25)

BIAS: < 1% cash

Economic Reports Due Out (Times are EST): NFIB Small Business Optimism Index (7:30am), ICSC-Goldman Store Sales (7:45am), Import and Export Prices (8:30am), Redbook (8:55am), Treasury Budget (2pm)

My Observations and What to Expect:

• Futures are taking a beating – down over 2% heading into the open.
• Asian markets were mixed. Europe is trading slightly positive.
• S&P recovered off of the lows from yesterday in an unbelievable fashion, and most of it happening in the final hour of trading. With 15 points of gains coming in the final 30 minutes of trading. 
• Yesterday’s action reminded me too much of what we saw last Tuesday when the market opened substantially lower as well and recovered by the end of the day. The following day we saw a major jump in equity prices. I would  not be shocked to see the same thing, which also led me to cover my existing short positions. 
• Despite opening below the support level for the bearish flag pattern on an intra-day basis, the S&P still managed to climb back and close within the pattern. 
• Best case scenario for the bulls is a rally to the upper band yet again for the bear flag pattern which would be somewhere around 1247 up to 1255. 
• A close below 1142 on the S&P would confirm the bear flag pattern, and likely mark the beginning of a new leg down in the market. 
• I still believe that ultimately we move lower, and will see another drastic move that likely breaks our recent lows from 8/9 in this market. 
• As always, you need to be on your ‘tippe-toes’ for possible ‘intervention’ news to help stymie the situation (like what we saw yesterday afternoon with China/Italy  news). 
• Support level that you need to watch today: Rising support off of the 8/9 lows (bear flag support) at 1142-4, followed by 1120 where there is significant support for the bulls, and then 1101 which is where the 8/9 intraday lows are at. All three of these could ultimately come into play today.
• If the market breaks below 1101 on the S&P, then we are almost assured of seeing a test of the major support level at 1040 in the coming weeks.
• Volume was average yesterday.
• My Conclusion: I don’t feel inclined to guess, and it would be a random one at this juncture, the direction of today’s market. I’ll be watching early morning action first, before jumping in any positions to gauge direction. 

Here Are The Actions I’m Taking:

• I covered out of all my short positions yesterday: Sold SDS at 24.55 for a -1.5% loss, Covered BKU at $22.08 for a 4% gain, Covered X at $26.61 for a 1% gain, Covered WWWW at $7.79 for a 2.8% gain, Covered OZM at $9.60 for a 6% gain. Sold BSX at $6.22 for a small gain. 
• I’m essentially 100% cash going into today’s open, and will likely wait at least the first 1/2 hour to guage market direction. 
• Follow me in the SharePlanner Chat-Room today for all my live trades and ideas (as well as everyone else’s).

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