Major indices finish lower amid GE earnings disappointment >>> READ MORE

Brief Pullback Could Create Buying Opportunity

Add new long positions on any market weakness


Editor’s Note: Filing in for Sam Collins is Ryan Mallory, founder of the financial blog Sam will return Monday, Nov. 8.

Current Long Positions (stop-losses in parentheses): TICC ($9.97), NFLX ($165), MCD ($76.92), QID ($11.92)

Current Short Positions (stop-losses in parentheses): None

Bias: 6% Long (-10% short considering the leverage in QID)

Economic Reports Due Out (Times are EST): employment situation (8:30 a.m.), pending home sales index (12:30 p.m.), Bernanke speaks (2 p.m.), consumer credit (3 p.m.)

My Observations and What to Expect

* Futures are showing some weakness prior to the employment number.

* Asian markets are seeing a lot of strength in trading with gains as much as 2.8%. European markets are trading with a slight negative bias to them.

* The S&P is clearly in a breakout mode after recently trading out of consolidation from the previous three weeks.

* S&P managed to close well above the 200-week moving average, which has acted as major resistance to the overall market — very bullish and promising for its long-term prospects. 

* Yesterday’s rally pushed the market above the April highs, which allows for the market to continue the long-term trend, dating back to March 2009.

* The employment number should play a pivotal role in the today’s market action.  

* Be very careful about piling on new positions at this stage of the rally. The market is overextended and well outside of its Bollinger bands, and makes it more likely we’ll see a healthy pullback or at the very least some consolidation before moving higher. Use any weakness to add new positions to the portfolio.

* The bears’ main aim is to erase at least 50%-60% of yesterdays gains, which would essentially create a bearish piercing candle pattern.

Actions I Will Be Taking

* Took solid profits in, Inc. (NASDAQ: AMZN), SanDisk Corporation (NASDAQ: SNDK), Jack in the Box Inc. (NASDAQ: JACK) and Greenhill & Co., Inc. (NYSE: GHL) yesterday.

* Added two new positions at the market close yesterday: McDonald’s Corporation (NYSE: MCD) and ProShares UltraShort QQQ ETF (NYSE: QID). QID is a short-term trade to take advantage of possible consolidation or a light market pullback.

* Will not hesitate to take profits in QID if the market pulls back 0.7% to 1%.

* I’ll be aggressive in adding new long positions to the portfolio on any market weakness.

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

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