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Trading Plan for October 9, 2012

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October 09, 2012 – Comments (0) | RELATED TICKERS: SPY , DIA , QQQ

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

Europe is trading mixed/flat.

Asian markets traded in mixed fashion, ranging from -1.3% up to +0.5%. 

US futures are 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):

Low volume day, due to Columbus Day holiday kept the market uneventful... but lower nonetheless. 

On the SPY, you basically have a bearish island reversal over the last three days, with the gaps on day 2 and day 3 in opposite directions. 

SPX continues to ride the 20-day moving average higher. Let's see if it holds yet again today. 

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. 

There is an obvious double top pattern forming on the S&P. Below 1430 would confirm the pattern and represent a market breakdown. 

If we a pullback, 1430 would mark critical support as it represents the uptrend that we've been on since the 6/4 lows. 

While the 20-day moving average has been violated on a number of occasions, price action doesn't tend to drop that far below it before popping back higher again. 

Another push above 1465, and ideally above 1474, would be bullish, and possibly lead to some squeezing of the bears. 

This would also create a 'higher-high' for the market which would be extremely important and pave the way for a test of 1500. 

Quickly approaching overbought conditions in the short-term, but not quite there yet. 

Failure to make a new higher in the near-term, would be indicative of a topping pattern in the broader market. 

Taking a look at the weekly chart of SPX, the conditions look very healthy with no signs of a near-term breakdown. 

For the bulls to build confidence among investors, there needs to be less of the intraday sell-offs. And the bears, if they really want this market to push lower, they need to take advantage of the intraday weakness it continues to get handed. 

VIX is trading at 15.

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 Opinions & Trades:

Charts:

 

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