Trading Plan For Next Week

Price and volume action hasn't been really favorable for the bulls last week. Volatility actually increased a little bit, which means something is boiling, but a very negative Friday suggests the Thursday's reversal was just many shorts covering into a gap down after they've been caught in a four day rally. So I guess we're pretty much very we've been for more than a month, just waiting for some sort of decision. As I pointed out in my previous plans, I will start watching individual stocks only when I'm satisfied with the market action. This strategy has kept me on the sidelines through this choppy correction, which has turned out to be a right decision. Anyway, my scenarios for next week are following.

Bullish Scenario For Stocks:

• Basically, I want to see a break of 1300 and I want to see it fast and on strong volume. Any low volume rally into 1300 would probably be just a bear trap and would better be shorted.
• After a break of 1300 I'd be glad to see some additional follow through. A crawling around resistance lines usually means there is no interest by big players to ride a rally, so such rallies quickly fizzle out.
• In short, before I become interested on the long side, the market will have to prove me its strength. A shakeout below 1260 or even 1250 is possible, but after that I want to see at least one or two very strong up days on very high volume.

Bearish Scenario For Stocks:

• In order to even consider shorting any stock I'd still like to see a shortable rally. This means several up days on lower and lower volume indicating that big money is not interested in an up move.
• I will probably open some minor short positions on a wedging rally into resistance, but a true confirmation would be a low close down bar on volume increase.
• Any minor rally after such a reversal would represent the highest probability short setup and then I'll become really aggressive on the down side.

As always, the above scenarios are just predictions. Any of them could materialize in many different bar variations. I'll update my trading plan immediatelly when any of above signs start to show up, confirming one or another scenario.