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Trading Plan for July 17, 2012

Recs

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July 17, 2012 – Comments (0) | RELATED TICKERS: SPY , DIA , QQQ

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

European markets are trading in a wide range from -0.3% up to +0.7%. 

Asian markets traded in a wide range from -0.4% up to 1.8%.

US Markets are moderately higher ahead of the open.  

Economic reports due out (all times are eastern): ICSC-Goldman Store Sales (7:45am), Consumer Price Index (8:30am), Redbook (8:55am), Treasury International Capital (9am), Industrial Production (9:15am), Housing Market Index (10am), Ben Bernanke Speaks (10am), 

Technical Outlook (SPX):

Dip buyers came in yesterday off of the days lows, and managed to rally the market almost back to break-even. It's safe to say that yesterday's action was consolidation from Friday's huge run-up. 

There's actually the possibility that we are forming a head and shoulders pattern on the daily chart when looking at the action from the past month. 

The main target for the bulls going forward is breaking through 1374 (and most importantly close above it) and establishing a "higher-high" in the market. 

Volume has tapered off the last two trading sessions. 

Though we are no longer overbought on the daily chart, the weekly chart and SPRI shows a much more overbought market.

After Thursday's elongated lower shadow, I've decided to adjust the upward trend-line off of the 6/4 lows connecting it with that day's lows. 

As a result, there is a well-defined channel that the market is trading in, and eliminates the bearish channel we had seen before. 

A break below 1331, would break the channel.

Huge doji candle on the weekly SPX - some might say its a shooting-star, but I'd disagree, as it occurred inside of last week's candle body. 

Nonetheless, it does represent some indecision by the markets, as well as underlying weakness, evident by the long lower shadow off of the body of the candle. 

During the six-straight days of sell-off that ended last week, the entire time, the bulls managed to keep the VIX under 20. Currently it sits at 17. 

30-minute chart shows a nice bounce and breakout of the temporary downward channel. 

Breaking through the 1390's will be difficult as there are plenty of separate resistance levels in that area. 

Below 1306-1308 price level, will nullify the current rally off of the 6/4 lows - would represent a 'lower-low' in the market. 

My Opinions & Trades:

 

Charts:

 

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