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Trading Plan for September 5, 2012

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September 05, 2012 – Comments (0) | RELATED TICKERS: SPY , DIA , QQQ

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

European markets are trading 0.3% higher. 

Asian markets finished -1.2% lower. 

US futures are trading slightly lower ahead of the bell. 

Economic reports due out (all times are eastern): MBA Purchase Applications (7am), ICSC-Goldman Store Sales (7:45am), Productivity and Costs (8:30am), Redbook (8:55am)

Technical Outlook (SPX):

Despite a rocky start, the market, after making new lows on the recent pullback, rallied back to finish near break-even, with a nice doji hammer. 

We'll probably see today, for the first time since 6/14, the 10-day moving average drop below the 20-day moving average. 

Despite pulling back for the better part of 11 trading sessions, for the bull's sake, the move has been very orderly, and without any panic. 

I've noticed a slight pop in volume over the last two trading sessions. Let's see if that continues. If so it would be a very welcomed sign for the market. 

SPX is nearing oversold conditions for the first time since mid-July. 

We continue to see is SPX fighting off a drop below 1396-7 short-term support level, as well as close above the psychological 1400 level. 

At the same time, the SPX still has the look of a bull flag to it still. 

Keep an eye out too, on SPY where there is a bullish island reversal pattern that has formed Wednesday-Friday last week. The last 3 times that we have gotten these, we've seen an immediate boost out of the market. Let's see whether the same thing happens again. 

Long-term uptrend support off of the 6/4 lows now shows support at 1384.

Despite the market showing some fatigue of late, the bias should still be to the long side.

30-min chart shows quite a bit of consolidation and side-ways trading over the past couple of weeks. 

Going forward SPX needs to close above 1422 and take out 1426 recent intraday highs.

VIX continues to climb and is at 18.

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 1354 for a new lower-low in the market.  

My Opinions & Trades:

Charts:

 

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