Trading Plan for February 1, 2012
Economic Reports Due out (Times are EST): MBA Purchase Applications, ADP Employment Report (8:15am), Treasury Refunding Announcement (9am), ISM Manufacturing Index (10am), Construction Spending (10am), EIA Petroleum Status Report (10:30am)
Premarket Update (Updated 8:40am eastern):
U.S. Futures are up strong on China PMI and possible Greek deal.
Asian markets traded mixed/flat yet again.
European markets are up on between +1.4% and +2.3%.
Technical Outlook (S&P):
Despite the strength today in the pre-market, the main goal for the bulls has to be to break recent highs at 1333, and close above them.
At that level you have a strong multi-year resistance level that I think will be difficult to break, dating back to 2007 market highs. See the article "A Bullish Love Affair", where I outline this in chart.
I wrote about a head and shoulders pattern on the EUR/USD chart yesterday, but overnight strength in the euro is putting the pattern at risk of being crushed.
The last two gap-ups in the market has been quickly sold, and resulted in down-days for the market, as was the case yesterday. Careful going long in the first 30 minutes of trading and wait to see whether the bears close the gap up or not.
A break above 1323, should put the S&P in position, to test the 1333 resistance level.
Volume yesterday was much higher than anything we've seen lately, and the highest so far this year.
We saw the 50-day moving average cross the 200-DMA yesterday, but I put little importance into this phenomenon - more folk lore than anything else.
Technical damage overall on the last 4 days of selling have been marginal at best due to the bounce each day off of the morning lows.
Monday marked the first lower-low in the S&P 30 min chart in well over a month.
Some minor support at 1286, but the next notable level of support comes from the up-trend off of the November lows, and currently lies at 1278.
Strong doji-candle formed on the weekly chart last week, which often signals reversals in the market direction.
Whether this market can sustain itself to the upside is anyone's guess long-term. But Short-term, there needs to be a pullback to 1249-1270.