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Get Ready for the Next Leg Up

Yesterday's pullback provides a good opportunity to add long positions


Current Long Positions (stop losses in parentheses): TICC ($10.28), NFLX ($165), MCD ($76.92), FLIR ($27.19)

Current Short Positions (stop losses in parentheses): None

Bias: 33% Long

Economic Reports Due Out (times are EST): MBA Purchase Applications (7 a.m.), International Trade (8:30 a.m.), Jobless Claims (8:30 a.m.), Import and Export Prices (8:30 a.m.), EIA Natural Gas Report (10:30 a.m.), EIA Petroleum Status Report (11 a.m.), Treasury Budget (2 p.m.)

My Observations and What to Expect

* Futures are flat.

* Asian markets were mixed and European markets are showing some weakness so far.

* Yesterday’s sell-off went a long ways to work off overbought conditions.

* In a strong market rally, you can’t expect much in the way of pullbacks. Instead, you need to look for pullbacks that fall within the context of the existing trend and how much the market can pullback without actually violating the trend.

* Yesterday’s pullback was more about profit-taking than anything else, providing a good opportunity to start bolstering the portfolio with long positions in preparation for the next leg up.

* Assuming that this market isn’t turning over, max pain for bulls if this sell-off continues is around 1,200, which represents the 10-day moving average.

* 1,275 on the S&P (give or take a few points) represents the next area of resistance on the charts.

* Also causing some resistance in the very near term is the fact that we are at the 61.8% Fibonacci retracement level from the October 2007 highs to the March 2009 lows.

* A break of the support at S&P 1,219 (April highs) isn’t overly concerning. Prior to breaking it, this price level offered very little price resistance.

* Jobless claims will be reported today (one day early due to the Veteran’s Day holiday tomorrow).

* Yesterday’s sell-off did nothing to change the upward trending character of this market.

* Bear’s aim is to hold the Fibonacci retracement levels and push the market below the 10-day moving average currently at 1,200 on the S&P.

Actions I Will be Taking

* Sold my position in the ProShares UltraShort QQQ ETF (NYSE: QID) yesterday at $12.34 for a quick 1.6% return.

* Added FLIR Systems, Inc. (NASDAQ: FLIR) to my portfolio at the market close yesterday at $28.35.

* Will look to add one or two new long positions to the portfolio today.

* I’m not looking for this market to move much lower, so I will begin taking on new positions in the portfolio where I can.

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

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