Trading Plan for September 21, 2011

Current Long Positions: QCOM Oct 60 Calls

Current Short Positions: None

BIAS: > 99% Cash

Economic Reports Due Out (Times are EST): MBA Purchase Applications (7am), Existing Home Sales (10am), EIA PEtroleum STatus Report (10:30am), FOMC Meeting Announcement (2:15am)

My Observations and What to Expect:

• Futures are trading slightly in the red, after spending most of the night in positive territory. 
• Asia traded in a mixed fashion, while Europe was down on average about 1.5%. 
• The market, (S&P) exhibited strength through out most of the day, spending a good portion of it’s afternoon range-bound at the highs, and then in the final 1.5 hours of trading, the S&P gave back all of its gains and finished in the red. 
• Yesterday’s action was very bearish, and leads me to believe that we’ll see further weakness going forward. 
• With the Fed announcement today, it is very difficult to gauge ahead of time, the direction it will go in. Expectations are very high for a big announcement, and Bernanke has a strong record of consistently pulling a “rabbit out of his hat”. Which makes me nervous about holding, in particular, short positions ahead of the announcement. 
• The S&P came very close to breaking through the 50-day moving average yesterday but failed to do so. 
• On the S&P the 10-day and 20-day moving averages have converged and offer a fair amount of short-term support. 
• Volume has been extremely light so far this week. 
• We are now in overbought territory.
• Resistance looms at the underside of the trend-line (now broken) from July ’09, which is also in conjunction with where the 50-day MA is at – 1225 on the S&P.
• S&P could be forming a head and shoulders pattern over the course of the last month. A dip lower from here is a must, and a break below 1159 would confirm the pattern.
• Bearish Flag pattern that is in the works would also be confirmed at 1159 break.
• As always, you need to be on your ‘tippe-toes’ for possible ‘intervention’ news to help stymie the Greece situation, particularly with the 2-day Fed Meeting this week too.
• Support level that you need to watch today: Rising support off of the 8/9 lows (bear flag support) at 1159, 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.
• My Conclusion: No way to predict how this market will end up today – It’s impossible to know with any certainty what will come out of it, and playing it heavily long/short is dangerous. 

Here Are The Actions I’m Taking:

• Closed out 2 trades in TZA yesterday for a net gain of about 3.8%, TNA for 3.3% and 2 losses in trading MFN for -2.2%
• Considering fading the intial reaction to the Fed announcement as it has been a false move over the course of recent Fed decisions. 
• Will look to day-trade both sides of the market today.
• 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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