Current Bias: 100% Cash

Economic Reports Due Out (Times are EST): MBA Purchase Applications (7am), Challenge Job-Cut Report (7:30am), ADP Employment REport (8:15am), ISM Non-Manufacturing Index (10am), EIA PEtroleum Status Report (10:30am)

My Observations and What to Expect:

  • Futures are moderately higher this morning. 
  • Asia saw losses range from -0.9% to -3.4%. Europe is seeing strong gains of about 2.6%.
  • In the final hour of trading yesterday, we saw a short squeeze of epic proportions. I personally have never seen the S&P rally 47 points within that short of a time-frame. It was absolutely stunning. 
  • Interestingly, we made new new lows, but ended up finishing a shade above the 1120 support level that has been a thorn in the side of bears. 
  • Look for a test today at approx 1135 on the S&P which represents the 10-day moving average. 
  • The past couple of weeks reminds me of late 2008, when the market would experience a series of massive sell-offs followed by a significant rally or two. 
  • A lot of people calling for a bottom, but honestly, I believe the market has a lot to prove before that can be considered. 
  • Volume was very strong yesterday, and has continued to increase over the past four days. 
  • As stated in previous trading plans “I don’t believe the S&P can ‘stair-step’ its way down, without subjecting itself to major bounces in the process.”
  • Another poignant warning recently made “The market continues to act as a dangerous place for the passive trader. Intraday day whip-saws creates gains and erases them very quickly. Take the gains when you can.”
  • Make sure that whatever you do, that you protect the gains that you have, and be ready for sudden and quick reversals in this market.
  • My Conclusion: I still remain overall bearish on this market, but would let the dust settle some on this last hour rally from yesterday before adding any new short positions. 

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Here Are The Actions I’m Taking:

  • Traded Direxion Small Cap Bear 3x (TZA) and Direxion Small Cap Bull 3x (TNA). Made a descent gain off of them (added 0.8% to the portfolio).
  • Will watch market action for the first 30min to 1 hour of trading before jumping into anything else.
  • Follow me in the SharePlanner Chat-Room today for all my live trades and ideas (as well as everyone else’s).