Trading Plan for August 20, 2012
Pre-market update (updated 8:30am eastern):
European markets are trading 0.5% higher.
Asian markets traded 0.8% higher.
US futures are mixed ahead of the opening bell.
Economic reports due out (all times are eastern): Chicago Fed National Activity Index (8:30am)
Technical Outlook (SPX):
Friday's small rally takes us to the cusp of breaking 1422 and posting new recovery highs.
There's no doubt that the bulls could use this resistance barrier overhead to take some profits and as a result we see a pullback in equities.
If we don't break above the 1422 mark, what you want to look for, in terms of a healthy market, is consolidation near the highs. A strong pullback would put that in major jeopardy.
The 10-day moving average is trailing price nicely and is offering solid support, but is close to parabolic.
Volume has increased over the last two days and is a welcomed sign.
We are back into overbought territory in the short and long-term.
VIX is at unbelievably low levels that haven't been seen since 6/2007!
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 before eventually breaking through 1422.
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.
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).
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: