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Trading Plan for September 17, 2012

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September 17, 2012 – Comments (0) | RELATED TICKERS: SPY , QQQ , IWM

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

European markets are trading -0.5% lower. 

Asian markets mixed as well, finished 1.1% higher. 

US futures are trading slightly lower ahead of the opening bell. 

Economic reports due out (all times are eastern): Empire State Manufacturing Survey (8:30am)

Technical Outlook (SPX):

A nice follow-through on Friday after an incredible breakout from the day prior. 

The main theme in today's trading plan is the market being well over-extended at these levels. 

Traders have their eyes fixed on SPX 1500, but it is more likely that this market will need to cool off some before moving higher. 

Using a Bollinger-band overlay, SPX is trading for its second consecutive day outside the upper band, with Friday's entire candle body outside the upper band. 

On the weekly chart, the price has creeped (very rare) outside the upper bollinger-band which historically led to a short-term pull-back. 

Volume  has increased for three consecutive days. 

It goes without saying we are overbought. 

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 (can't believe I'm writing that). 

Resistance at 1437 and 1440 was broken with little problem and now becomes support. 

Bull-flag breakout we had been noting in recent days came to fruition. 

30-minute chart shows key support at 1433-36 and 1396. 

Upward trend-line off of the 6/4 lows has rising support at 1404. 

SharePlanner Reversal Indicator confirmed the move higher this past week. 

VIX above 14, and bucked the markets upward move. 

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

Should a sell-off ensue after the Fed action/comments today, look for support to come in at 1438.

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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