Trading Plan for January 27, 2012
Economic Reports Due out (Times are EST): GDP (8:30am), Consumer Sentiment (9:55am)
Premarket Update (Updated 9am eastern):
U.S. Futures are slightly lower
Asian markets are trading in a mixed fashion, with little deviation from breakeven.
Europe is trading in a mixed fashion
Technical Outlook (S&P):
Very bearish market session yesterday, as we gapped up strongly at the open, only to see a perpetual sell-off throughout the day, and to finish in the red.
Yesterday marked the first truly negative session for the year.
Typically when we gap above the previous day's price action, and finish below the mid-point of the previous day's up candle, that is considered a very bearish piercing candle pattern.
I did a post entitled "A Bullish Love Affair" where I show a five year chart, and the very strong downward, multi-year resistance pattern that we are currently testing. We were rejected at this price yesterday and could lead to further price decay in the coming days.
Volume was stronger today, than yesterday's FOMC day and stronger than anything we've seen lately. This is interesting because it was the first legitimate down-day of the year.
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.
Since the 19th of December, the S&P has not put in a single "lower-low" even on the 30-min chart. This needs to happen before the bears can do anything worth mentioning.
We've traded above the 10-day moving average for 25 straight days, and have finished in the green 19 times during that span (76% of the time).
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.