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Trading Plan for July 20, 2012

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July 20, 2012 – Comments (0) | RELATED TICKERS: SPY , QQQ , DIA

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

European markets are trading -1.4% lower.. 

Asian markets traded in excess of -1.0% lower. 

US futures are moderately lower ahead of the open.   

Economic reports due out (all times are eastern): None

Technical Outlook (SPX):

SPX finally manged to break and close above 1374, thereby putting in a higher-high in the market yesterday. 

As it stands now, with this new 'higher-high' in place, the market becomes much more favorable for the bulls. 

Volume has increased, ever-so-slightly during the past 3 days. 

On 7/18 we managed to break through the descending trend-line off of the 4/2 highs (see chart below). 

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. 

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

Watch the SPRI - it shows a much more overbought market.

After last 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. 

The VIX remains under 16.

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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