Beware Dead-Cat Bounce

by Ryan Mallory | November 18, 2010 10:45 am

Current Long Positions (stop losses in parentheses): TICC ($10.28), HRS ($44.99)

Current Short Positions (stop-losses in parentheses): TFSL ($8.23), ADBE ($30.10)

Bias: 2% Short

Economic Reports Due Out (times are EST): Jobless Claims (8:30 a.m.), Leading Indicators (10 a.m.), Philadelphia Fed Survey (10 a.m.), EIA Natural Gas Report (10:30 a.m.)

My Observations and What to Expect

* Futures are strong up over 1%.

* Asian and European markets are seeing gains of 1%-2% across the board.

* Yesterday, the bulls were able to avoid further selling, and keep the price action within the consolidated trading range from October.

* Today’s gap open will put the S&P 500 in place to reclaim the 20-day moving average that it lost on Tuesday. Watch for whether this key average acts as support, as it done previously.

* Markets are oversold on a short-term basis, which should further help the bulls today.

* The one thing to be leery of in this rally is whether it is a dead-cat bounce. It is very typical to see these extreme bounces in the market before resuming the selling efforts.

* We’ll have POMO every day this week. The full schedule can be found here[1].

* The main goal for the bulls today will be to avoid a large and inevitable gap-fill (whether or not that’s today) and ultimately retake the 20-day moving average.

* The bears should do everything they can to break early morning lows and fill this gap, and then get below yesterday’s lows.

Actions I Will Be Taking

* Will look to add one or two new positions to the portfolio today (a long and a short).

* Tightened the stop-loss in TFS Financial Corporation (NASDAQ: TFSL[2]) to $8.23.

* Will look to tighten my stop loss in Harris Corporation (NYSE: HRS[3]) on market strength.

* Follow me in the SharePlanner Chat-Room[4] today for all my live trades, including my day trades.

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Endnotes:

  1. here: http://www.newyorkfed.org/markets/tot_operation_schedule.html
  2. TFSL: http://studio-5.financialcontent.com/investplace/quote?Symbol=TFSL
  3. HRS: http://studio-5.financialcontent.com/investplace/quote?Symbol=HRS
  4. SharePlanner Chat-Room: https://shareplanner.com/education-center/chat-room.html
  5. SharePlanner.com: https://www.shareplanner.com/trading-system/swing-trading-system-long-setups/trading-statistics.html

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