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Trading Plan for October 12, 2012

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October 12, 2012 – Comments (0) | RELATED TICKERS: SPY , DIA , QQQ

Pre-market update (updated 9am eastern):

Europe is trading mixed/flat.

Asian markets traded mixed/flat.

US futures are slightly higher ahead of the opening bell. 

Economic reports due out (all times are eastern): Producer Price Index (8:30am), Consumer Sentiment (9:55am), Treasury Budget (2pm)

Technical Outlook (SPX):

Another day where we moved higher early on but then pulled back thereafter and wiped out the day's gains. 

Short-term, we are extremely oversold setting up conditions that are ripe for a bounce. 

We have actually broken the long-term trend-line off of the 6/4 lows. That is no doubt problematic for bulls. 

Despite that, I still want to see whether we break and close below 1430. 

Double-top in the SPX is nearly confirmed. 

No where in the selling are we really seeing panic. It's more like a leaky faucet that continues to just drip...drip...drip...

SPX closed right on the lower bollinger band. Last time the lower BB was tested we saw an eight day move that took us from 1396 to 1473. 

Over the past year, a re-test of the lower bollinger band has been a great opportunity to get long at. Beyond a year, you have last summer's sell-off that paid no attention to the breach price made on the lower BB. 

What is astounding is that over the past five days, volume has grown increasingly weak. Like what we saw this summer. 

50-day moving average is in play at 1427. 

On the SPY, you basically have a bearish island reversal from 10/4-8 with the gaps on day 2 and day 3 in opposite directions and was confirmed by yesterday's follow-through. 

After Friday's breakout failure and back below key resistance, it is important to recognize that the market is in a broader market consolidation range. Break of 1430 changes that though. 

VIX is now back below 16.

Fed's QE3 launch is going to add a lot of buying power to this market and drive more people out of interest-bearing assets and into equities in search of some kind of return. 

One area of concern is the 3 large gaps off of the 6/4 lows that remain unfilled, including 6/6, 7/26, 8/3

 

My Swing Trading Strategies:

 

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