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Trading Plan for July 18, 2012

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July 18, 2012 – Comments (0) | RELATED TICKERS: SPY , IWM , QQQ

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

European markets are trading 0.2% higher. 

Asian markets traded -0.6% lower. 

US futures are slightly lower ahead of the open.  

Economic reports due out (all times are eastern): MBA Purchase Applications (7am), Housing Starts (8:30am), Ben Bernanke Speaks (10am), EIA Petroleum Status Reports (10:30am), Beige Book (2pm)

Technical Outlook (SPX):

Yesterday saw the dip buyers jump in and buy the intraday dip, after an initial sell-off from a gap-up. 

Yesterday showed that the bulls are still well in control of this market. 

SPX needs to close above 1374 to extend the current rally. 

A close below 1325 would create both a lower-high and a lower-low, and thereby turn the market bearish. 

It didn't take long but SPX is back into short-term overbought. 

Indices, including the Nasdaq and Russell, do not show this as of yet. 

SPX running into resistance off of the double-top neckline that formed back in April '12. Resistance is at 1363-5. May be a reloading area for the bears.

Resistance shows up very well on the weekly chart (see below). 

Weekly shows SPX coming off of overbought levels, ever so slightly. 

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. 

Volume continues to provide low readings. 

While we are coming off of overbought levels on the weekly chart, the 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 1333, 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. 

The VIX remains under 17.

30-minute chart shows somewhat of an inverse head and shoulders pattern, and support at 1356. 

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

My Opinions & Trades:

Charts:

 

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