Friday's Game Plan

Here is the game plan for Friday, taken from today's Trade Report.

Market Notes:

The market drifted up Thursday on decent (but not great) volume, and is nearing the $85 resistance level. Stochastics are very overbought right now, which leads me to believe a pullback is in order. From a trading standpoint, I hope there is a pullback. Entry will be easier once overbought conditions are worked off a bit.

I may consider a short trade if we bounce towards $85 on average volume. This would be a quick "against the short term trend" trade with a tight stop probably around $87.

Increasing the odds of a pullback soon is the fact that the T2108 indicator, which measures the number of stocks above the 40 day moving average, is reaching overbought territory at 75. I like to see the indicator hit 80+, which should happen if we get another day or two of bounce.

Trade Tracker:

I am still holding SSO and FAS. I thought about unloading half of my SSO position today, but decided against it since my target has not yet been hit. I am concerned that FAS has not kept pace, but will still honor my stop.

Game Plan:

I continue to wait for a pullback for entries. I also may think about shorting if we get more bounce on average volume. Any shorts will be quick trades.

Focus List:

I continue to wait for pullbacks in focus list stocks. There were a few good breakouts today -- solar stocks like First Solar (FSLR) were on fire --which I'll post over the weekend; there's no need to post then since it will take a multi-day pullback for entry. (See focus list stocks in Monday report.)

All focus list stocks are over-extended.

If I decide to short strength for a quick trade, I'll use one of the following inverse ETFs: SDS, QID, FAZ or SRS.

Comments

[Conan the B...:]

very nice, go with the trend, at least one more day anyway.

Dotted connectors, SPY, Downward Channel.
Tops, Beginning of Nov. and Jan. extend down.
Bottoms, 3rd week Nov., first week March extend down.

I noticed how nice the channel looked when it stopped precisely where it should have if a parallel line would have been drawn to encompass the Nov. low.

My schtick, take a chart, draw lines all over the place, see what sticks out.

My longer term outlook would change from Bear mode to Bull Mode if this channel could be broken decisively to the upside, say by 3% or more.

Either way though, the overbought conditions will still be rectified to the downside.

Just an opinion.

Mar 27 02:16 AM

[J. D. Swampfox:]

If the banks are going to be able to sell their bad assets to the public/private partnerships at book value then this is good for banks that are solvent, but doesn't help ones that already are insolvent. See Roubini video at www.swampreport.com/. Still either way, it looks like we can expect much volatility in FAS and FAZ over the next weeks.....

Mar 27 08:30 AM

[ksmithdc:]

Interesting read. Thanks.

Mar 27 08:38 AM

[Conan the B...:]

Saw the Roubini interview live, You should have seen him squirm. He isn't as glib as he used to be.

He has to pause and think about how he answers the questions now. Remember that he said, the entire system is insolvent. Apparently, it no longer is.

Going to view your video, JD.

Mar 27 10:08 AM

[Conan the B...:]

JD: Nice site, Selected excerpts but consistent with what his outlook is.

Roubini can be ranked better than Kudlow and Cramer. At least, he has changed his view from All Banks to Some banks. If all the system can lose is $3.6 Trillion, hell, we are home free.

IMO

Mar 27 10:17 AM

[LyleP:]

I agree with paultaut on both points:
- it is a nice site

- and yeah...if I could truly believe that we're only $3.6 trillion in the hole...then I agree that we would be home free....but is that $3.6 trillion in today's dollars or...dollars 1-2 years from now? :|

Mar 27 11:06 AM