Current Long Positions (stop losses in parentheses): VMW ($83.70), APOG ($11.56), BIDU ($105.80), ESV ($48.75)
Current Short Positions (stop losses in parentheses): DTV (40.50)
Bias: 22% Long
Economic Reports Due Out (times are EST): MBA Purchase Applications (7 a.m.), Quarterly Services Survey (10 a.m.), EIA Petroleum Status Report (10:30 a.m.)
My Observations and What to Expect
* Futures are mixed heading into the open.
* European and Asian markets are mixed as well.
* Yesterday’s trading action was extremely disappointing for the bulls. After gapping above the 1,227 level, the S&P 500 sold off in late afternoon trading, failing to hold the important price support level.
* If you look at the weekly chart, we are essentially stuck in a sideways market pattern between 1,186 and 1,227 — a 41-point price range.
* Volume was extremely high yesterday, despite finishing flat.
* As a result of the action seen yesterday, we are now looking at a shooting star pattern, which can be a trend-killer. The last couple of times we have had one on the S&P, we’ve seen consolidation follow, which would seems like a high possibility at this point.
* I am on high alert for a possible change in the short-term trend in this market. I recommend traders to the long side show a lot of caution as well. While I am not yet willing to close out my long positions, I will not hesitate to do so if we see further selling today.
* The current rally on the daily charts still has the makings of what we saw on Sept. 1, after which the market rallied for over two months.
* Dip buying will continue to be the name of the game for traders.
* The U.S. dollar and gold seem to once again be trading inversely to each other. The dollar rebounded yesterday, but still did not manage to improve itself from a technical standpoint.
* For the bears: Hold on to the late day sell-off and push the markets lower today. Doing so will cause the bulls to reconsider the legitimacy of this rally.
* For the bulls: Reclaim the 1,227 level on the S&P and be sure to close above it.
Actions I Will Be Taking
* Will look to add some morning breakout plays to the portfolio today.
* DIRECTV (NASDAQ: DTV) is my lone short position, but I may add more should the market continue to show weakness.
* Tightened the stop-losses in DTV.
* Added Ensco plc (NYSE: ESV) to the portfolio.
* Follow me in the SharePlanner Chat-Room today for all my live trades, including my day trades.
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