Trading Plan for January 24, 2012
Economic Reports Due out (Times are EST): FOMC Meeting Begins, ICSC-Goldman Store Sales (7:45am), Redbook (8:55am)
Premarket Update (Updated 9am eastern):
U.S. Futures are mixed/flat.
Asian markets Asian markets finished about 0.3% higher on the day.
Europe is showing weakness ranging from -0.8% down to -1.1%.
Technical Outlook (S&P):
Large doji candle formed on the S&P daily chart yesterday, which represents indecision on behalf of the market.
Based on today's open, we are poised to fill the gap up from last Thursday.
Speaking of gaps, we still have the recent gap ups from 1/17 and 1/3 left unfilled, which if we were to eventually fill them, would break the trend-line off of the October lows.
Volume still remains unimpressive and on par with recent readings.
Be aware that we have the FOMC Meeting, State of the Union Address and GDP report this week, all which can hold heavy sway over the market.
30 minute chart shows a nice head and shoulders pattern forming, as does the 5 minute chart.
Today's weakness will open us below the descending trend-line off of the 5/2/11 highs.
We're at overbought levels, that practically always leads to a pullback of some kind in the short-term.
We've traded above the 10-day moving average for 22 straight days, and have finished in the green 18 times during that span (82% of the time).
Bull flag mentioned yesterday on the 30-min chart, broke out but was unable to sustain the gains.
Last January we marched higher in all the indices in similar fashion in similar fashion to what we are seeing now, 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.
Short term support for the S&P lies at 1278, 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, and 1/17. Highly, highly unlikely all four of these gaps go unfilled for very long.