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Monday's Gameplan

|Includes:ABC, AMAT, DVA, EMR, EW, LXK, MFLX, Power - One, Inc. (PWER), REW, TEL

After far too much barbecue this weekend, and quite a bit of time looking at charts, I have come to the following conclusions:  (Standby for speculative market prediction…)

1. The markets are due for a bounce.

2. It will not be a large bounce, and will likely reverse down before the end of the week.

3. Hold on to your hat, because this rollercoaster drop isn’t over yet.

This chart of the S&P 500 shows my train of thought for the broader market.  Note the extended move down last week, and the fact that we’re sitting on a support line.  Support like that was made to be broken, but I expect that the market will retrace a bit higher over the next 72 hours.  That 1060 line on the SPX looks like a good target, and I noticed a lot of similar patterns in other charts this weekend.

So do I sell now, or watch?  Futures are down modestly as I type this, and my plan is to hold my current positions planning to pick off higher prices at reasonable retracement levels (around 5% higher than current).  Sell orders at those prices are already placed.  My hedge that did so well last week will be closed tomorrow morning, anticipating entering new short positions later in the week.

Faster and funnier, here are my specific plans for each of my positions:

TSP Account (Gee wasn’t that a bucket of hurt last week) – Plan is to exit to bonds on Wednesday (possibly Tuesday if the retracement moves quickly).  After that retracement; SPX, EFA, and the rest of the indexes look set for a free fall.  Here are my targets for these indexes by the end of the summer:

  • S&P 500:  Next support level (after a retracement) is 875 to 900.
  • EFA:  Next support is near 36.
  • Wilshire 4500: Bounce to about 525, then freefall
  • Dow:  Though it sounds shocking, I wouldn’t be surprised by DOW 8000 by the end of 2010.
  • AGG (bonds): Look like they’re going to the moon.  People want to park their cash somewhere.

Here’s the sell orders on deck for this week, let’s see if we can hit these levels on the retracement:

  • PWER: 7.50
  • AMAT: 12.75
  • TEL: 26.75
  • EMR: 46.00
  • ABC: 31.70
  • DVA: 64.00
  • EW: 57.00
  • LXK: 35.00
  • MFLX: 25.00

I’m off to work early tomorrow, hoping for a quiet open to cash in those calls on REW.

Disclosure: Long PWER, AMAT, TEL, EMR, ABC, DVA, EW, LXK, MFLX, and REW