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Today's Trading Plan: To Bounce or Not to Bounce

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November 14, 2012 – Comments (0) | RELATED TICKERS: DIA , QQQ , SPY

Pre-market update (updated 8:00am eastern):

Europe is trading -0.6% lower.   

Asian markets traded 0.7% higher. 

US futures are slightly higher. 

Economic reports due out (all times are eastern): MBA Purchase Applications (7am), Producer Price Index (8:30am), Retail Sales (8:30am), Business Inventories (10am), FOMC Minutes (2pm) 

Technical Outlook (SPX):

Another trading session that despite the early morning bounce off opening weakness, the market could not hold its gains and instead sold off 14 points on the SPX from the day's highs. 

For the third day in a row, price pushes above the 200-day moving average intraday, but fails to hold it into the close. 

Along the same lines, price continues to rest on the lower band of the declining channel from the October highs. 

Last three days we've seen the market try to bounce, but do so unsuccessfully. The worry for the bulls is whether that opportunity for the bounce has come and gone. 

Typically a dead-cat bounce is a 'snap-back' reaction in the market. It doesn't typically occur after days of consolidation. We may need to see additional selling if that dead-cat bounce is going to occur. 

Near-term support levels are are at 1374-5 and if that breaks there's support at 1356. Both support levels are considered minor support levels. 

If there is a rally in the coming days, I'd look for 1404 to be targeted resistance

We are undoubtedly oversold short-term and long-term. 

Price is back inside the lower-bollinger band. 

A lower-low was established at 1403 as well as a previous lower-high. All bearish developments of an established downtrend. 

Last time we broke through the 200-day SMA, it led to a major sell-off in August 2011 that lasted through early October of that same year. 

The 30-minute chart show a nice block of consolidation of late. 

VIX has been all over the map of late, and dropped 10% yesterday and settled above 16. 

My Opinions & Trades:

Chart for SPX:

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