Trading plan for September 7, 2010

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The S&P 500 cash index (SPX) closed at 1104.51 on Friday, covering its losses from the previous two weeks, and kicking off the month of September with a solid three-day rally. It added 3.7% for the week.

This week we have a rollover day on Thursday and volatility will continue to increase as we approach the rollover. If economic reports are better than expected this week, watch for a further rally.

E-mini futures contract (ESU0)

ES moved together with its big brother the SPX last week. It looks more likely we will see a C move instead of the declining wave 3. But we can’t eliminate the second possibility completely.

Because Sept. 9 is rollover contract day, the September contract value will move close to the SPX cash price, and we (along with the rest of the market) will begin trading the new December contract. Our CIT day will be on Sept 11.

A breakout above 1120 will eliminate the possibility of a declining wave 3 entirely. In that case the C top around 1135-1137 will be the upside target.

Date Added: 2010-09-06 09:07:12
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