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Trading Plan for September 6, 2012

September 06, 2012 – Comments (0) | RELATED TICKERS: SPY , IWM , QQQ

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

European markets are trading 1.4% higher. 

Asian markets finished 0.1% higher. 

US futures are trading moderately higher ahead of the bell. 

Economic reports due out (all times are eastern): Challenger Job-Cut Report (7:30am), ADP Employment Report (8:15am), Jobless Claims (8:30am), ISM Non-Manufacturing Index (10am), Quarterly Services Survey (10am), EIA Natural Gas Report (10:30am), EIA Petroleum Status Report (11am)

Technical Outlook (SPX):

Another controlled/orderly sell-off in the market yesterday. 

The 10-day moving average crossed below the 20-day moving average just as we spoke about yesterday. This is the first time since 6/14 that the 10-dma has been below the 20-dma. 

SPX continues to bull-flag over the past 12 trading sessions. Today, based on pre-market action, could be the day that it breaks out of that pattern. 

If we can trade above and close above 1411 today, it would likely signify a breakout of that bull-flag pattern. 

Volume has improved a good bit over the past three trading sessions. 

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. 

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 a shade below 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: