Trading Plan for January 20, 2012
Economic Reports Due out (Times are EST): Existing Home Sales (10am)
Premarket Update (Updated 9am eastern):
U.S. Futures are mixed (with Nasdaq showing some strength) but overall, they are down slightly.
Asian markets trading much higher between +0.8% up to 2.0%
Europe is trading in a mixed/flat fashion.
Technical Outlook (S&P):
The S&P challenged the 1313 price level of the descending trend-line off of the 5/2/11 highs, and broke through it, albeit barely.
Ideally, for bulls, they need to create separation between the descending price level and current price action, which would require additional follow-through yet again today.
A sell-off here, would disqualify the break of the descending trend-line that we saw yesterday.
Volume continues to be on par with recent weeks.
We've traded above the 10-day moving average for 20 straight days, and have finished in the green 16 times during that span (80% of the time).
Very solid uptrend in place on the 30-minute chart.
5-min chart shows a bull flag - break above 1315, and we could see another leg higher, intraday.
Market is absolutely due for a pullback - "when" is the big question. Last January we marched up nicely in similar fashion, then on the 28th of the month, there was a major sell-off out of nowhere. I would not be surprised to see a similar scenario between now and the end of the month as well.
Over the past 3 months we have rarely had a trending down-day, meaning the market continues to put in lower-lows and lower-highs. Instead, we get a strong push in the morning, followed by a brief basing pattern, and finally a rally in the afternoon that wipes away much of the day's losses. Remember this going forward and in particular with today's slight weakness.
Short term support for the S&P lies at 1261, and long-term support off of the October lows lies at around 1242. The market isn't anywhere close to threatening these levels.
There still remains unfilled gaps from 11/28, 1/3, 1/10 and 1/17. Highly, highly unlikely all four of these gaps go unfilled for very long.