03-29-15 Trade Plan

After the declines we saw last week, the NASDAQ is still hanging onto the previous daily swing low which is about 1.5% above YTD break even.  The 50 day average is rising and the Russell 2000 is still leading with higher highs and lows, also with a rising 50 day.  If anything is going to pull this market back up to make new highs it will be the Russell 2000, because this is the leader with the cleanest up trend right now.

The flip side, or the weak point in the indices is the S&P.  The previous high we just put in was not equal like NASDAQ or higher like Russell, it was lower.  Now price is trying to hang onto the previous low, which makes a lower high & equal low.  One good close below $204 in the SPY would put in a pattern of lower highs and lows; and put it in negative YTD performance.  This isn't the end of the world though, just means market isn't ready for more buying but at the same time don't be complacent.  Just follow the price and the trend.



So for strength I'll be focusing on the Russell and for weakness I'll be watching the S&P.  If sellers win, I don't care what the Russell is doing.  If buyers win, I don't care what the S&P is doing.  Right now it is unclear for my time frame, which is why I'm laying out this dichotomy.  Whoever "wins" will be measured by intraday trends.  There are no aligned intraday trends in S&P or NASDAQ right now which is what I want for swings, Russell 2000 has a 130m trend aligned with daily.

This is why day trading is back into my process.  When the market is just being choppy, no real clear signals, and not a good swing trading environment, it's usually a good day trading environment because the volatility picks up.

The watch list got at least cut in half last week and even now the setups really aren't the greatest.  Good even great setups need the indices backing them up as I always say and as we saw last week.  Most of the names here are more correlated or associated with the Russell 2000 which is good if the Russell holds everything together.

But like I've been implying, the environment for swing trading is not here right now, maybe it is maybe it isn't is not what I like to trade.  We had one good run through February and the rest of the time has been relatively high volatility and large swings.  So I'm using my common sense here and going with the flow of the market.  It makes sense to pull out the day trading card if that's a skill you have.  Thanks for reading

-Michael