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Trading Plan for August 22, 2012

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August 22, 2012 – Comments (0) | RELATED TICKERS: SPY , DIA , QQQ

Pre-market update (updated 8:30am eastern):

European markets are trading -1.1% lower. 

Asian markets were off -0.7%.. 

US futures are slightly lower ahead of the opening bell. 

Economic reports due out (all times are eastern): MBA Purchase Applications (7am), Existing Home Sales (10am), EIA Petroleum STatus Report (10:30am), FOMC Minutes (2:30pm)

Technical Outlook (SPX):

For the first time in a long time we  saw a pullback after rallying strong in the morning, and a subsequent sell-off to finish lower on the day. 

What's significant about this is that it occurred after breakign above 1422. 

At this point, I'd consider yesterday's sell-off to be profit-taking and perhaps even a pre-determined profit-taking level in which once that 1422 level was triggered the wayve of selling orders came in an reversed the market. 

Volume increased to the highest volume in weeks. 

Watch the 10-day moving average today at 1409-10 - this has represented a regular point for dip buying in the market to occur. 

It's not uncommon if we consolidate below the 1422  resistance level for a while. You just don't want to see a steep sell-off after touching the 1422 level. 

We remain overbought both in the short and long-term time frames. 

Strong spike in the VIX pushing it back  up above 15. 

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. 

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 1370.

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:

Charts:

 

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