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Market Setting Up for a Short-term Pullback

Wait for the market to give back some gains before jumping on the long side


Current Long Positions (stop losses in parentheses): TICC ($10.21), NFLX ($165), MCD ($76.92), QID ($11.92)

Current Short Positions (stop losses in parentheses): SBUX ($31.37)

Bias: 4% Short (-20% short considering the leverage in QID)

Economic Reports Due Out (times are EST): None

My Observations and What to Expect

* Futures are showing some weakness.

* Asian markets were up about 1%, while European markets are trading with a slight negative bias.

* Today sets up as an excellent pullback opportunity. Wait for the market to give back some gains here before jumping into anything on the long side.

* With the upside break through of the 200-week moving average, history suggests that this leads to a major rally in the markets.

* The next level of resistance for the bulls is 1,275 on the S&P 500.

* Initial support for the S&P on a pullback lies at the April highs, which is 1,219 or 6 points below where it is currently trading.

* There is absolutely no reason to be short except for the very near term where the market needs a small pullback before advancing any further. Any significant position building to the short side is a reckless use of portfolio capital.

* There are no scheduled news releases due out today that could impact the market.

* Wait for some weakness in this market before adding new long positions. Do not try to chase after this market.

* For the bears, look for a gap open that is below Friday’s lows with further selling thereafter, which would be ideal, and at the least, some selling today that begins to erase Thursday’s gains.

Actions I Will be Taking

* Added one new short position to the portfolio on Friday: Starbucks Corporation (NASDAQ: SBUX), which looks to have made an exhaustion gap-up on Friday.

* Will look to sell the ProShares UltraShort QQQ ETF (NYSE: QID) and cover SBUX today on market weakness.

* Will add one or two new long positions to the portfolio on any decent amount of market weakness.

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

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