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Trading Plan for October 24, 2012

October 24, 2012 – Comments (0) | RELATED TICKERS: SPY , DIA , QQQ

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

Europe is trading 0.3% higher. 

Asian markets traded mixed.

US futures are trading moderately higher. 

Economic reports due out (all times are eastern): MBA Purchase Applications (7am), PMI Manufacturing Index Flash (8:58am), New Home Sales (10am), EIA Petroleum Status Report (10:30am), FOMC Statement (2:15pm)

Major sell-off in the SPX yesterday, which has taken price action well below the 50-day moving average. 

A bounce here becomes all the more likely as price on SPX is well below the lower bollinger band. Which is something we haven't seen since the extended sell-off in May. 

We also broke below the critical 1425 support level. This creates an obvious lower-low in the market, but also break down out of current price channel. Very bearish. 

Market shows signs that it is short-term oversold. 

Volume has been 'average' over the past couple of days. 

Next support level lies at 1400. 

Weekly chart also supports a breakdown in the previous channel, and end to its longer-term uptrend off of the June lows. 

Watch the trend-line on the weekly chart by drawing a trend-line off of the October 2011 lows. This trend-line breaks at 1398-1400 as well. 

30-minute chart shows a beautiful triple top that has confirmed. 

Don't forget, there is a FOMC statement, which makes things even more interesting since it is the last one before the election. 

VIX is a shade below 19.

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

Chart for SPX: