This Week's Market Plan

Here is my plan for the market this week. The member only "Trade Report" also included my focus list, consisting of the stocks I plan to trade if we get a pullback.

Market Notes:

As I noted Sunday night, the cup and handle pattern emerging from a bottom formation looks good. While it may not be a true bottom, it at least gives an intermediate term clue. The market is nearing short term overbought, so I do not feel comfortable adding longs here. I am waiting for a dip.

If the market continues to inch higher towards near term resistance, I may enter a quick short trade in anticipation of a pullback. If the pullback does come, I would expect a move to support and then resumption of current trend (higher). Thus, my stop on any short trade would be tight, and target near support.

If we get a pullback before becoming extremely overbought (we are currently only slightly overbought), I'd like to start adding positions once SPY hits the 79-81 range.

If we get extremely overbought, I would add shorts in the 85-86 range, with a stop around $88.

click to enlarge

How overbought is this market?

Take a look at the T2108 indicator (stocks above 40 day ma) and the answer is clear: we are nearing extreme overbought levels. A little more bounce would get us near 90, which is where I would look to short.