Trading Plan for August 17, 2012
Pre-market update (updated 8:30am eastern):
European markets are trading 0.3% higher.
Asian markets traded 0.8% higher.
US futures are mixed ahead of the opening bell.
Economic reports due out (all times are eastern): Consumer Sentiment (9:55am), Leading Indicators (10am)
Technical Outlook (SPX):
Yesterday's rally was quite a shocker for most market participants and broke out of the 5-day trading range.
The 10-day moving average has come right up underneath the bottom of price action. Use this level as the first support level for the markets should a pullback occur.
Volume picked back up yesterday, but still at historically low levels. If you take out volume for ETF's and high frequency trading, there a relatively low amount of traders in this market.
The next destination for this market is a move towards 1422 - which represents the recovery highs.
You may also see a pullback to 1405, which is the top consolidation range the market pulled out of. That too may offer a level of support for SPX as well.
We've managed to come off of overbought levels in the short-term. But remain extremely overbought longer-term.
Since the pullbacks off the 6/4 bottom, the pullbacks have ranged around 30-60 points each time, which would give us a range of 1390-60.
With these low volume levels, continue to expect intraday choppiness in the market.
Next level for bulls to overtake is the 1422 recovery highs on the SPX.
It's not uncommon to see large market rallies going into an incumbent re-election.
One area of concern is the 3 large gaps off of the 6/4 lows that remain unfilled, including 6/6, 7/26, 8/3
At this point, uptrend support rests at 1361.
SPX trading above all significant moving averages (10,20,50,200).
VIX has moved below 15 for the first time since March.
If another sell-off were to ensue, watch for a break and close below 1354 for a new lower-low in the market.
My Opinions & Trades: