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Trading Plan for October 2, 2012

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October 02, 2012 – Comments (0) | RELATED TICKERS: SPY , IWM , QQQ

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

Europe is trading 0.4% higher. . 

Asian markets traded mixed/flat. 

US futures are trading slightly higher ahead of the bell.

Economic reports due out (all times are eastern): ICSC-Goldman Store Sales (7:45am), Redbook (8:55am)

Technical Outlook (SPX):

Despite finishing up on the day yesterday, the market had a very bearish tone to it, and saw the market give up more than 80% of its gains. 

A move where you end up near break-even on the day, despite being up over 1% early on is a strong sign the bears are aggressively shorting spikes, and are loading up on short positions. 

Either we squeeze much higher or the bears drive this market much lower - but either way volatility is picking up. 

After yesterday's intraday sell-off, you have what is starting to look like a bear-flag forming on the day. Bulls need to break the previous highs, in order to nullify the pattern. 

Volume has been average of late. 

30-minute chart is beginning to show the makings of a nice downward channel forming. 

Ideally, bulls need to get price back above the highs or at least near them from yesterday. 

For the bears, Driving price below Friday's lows, and ultimately Wednesday's lows, is ideal for a continuing downtrend. 

VIX is trading back above 16. 

Beyond that there is some (very slight support) at 1428. More significant support lies at 1396 and 1412. 

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. 

Going back years, there really is little in the way of resistance for the markets until it tests 1500.

Upward trend-line off of the 6/4 lows has rising support at 1423

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

If another sell-off were to ensue, watch for a break and close below 1396 for a new lower-low in the market.  

My Opinions & Trades:

Charts:

 

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