Trading Plan for January 5, 2012

by Ryan Mallory

Economic Reports Due out (Times are EST):Challenger Job-Cut Report (7:30am), ADP Employment Report (8:15am), Jobless Claims (8:30am), Bloomberg Consumer Comfort Index (9:45am), ISM Non-Manufacturing Index (10am), EIA Natural Gas Report (10:30am), EIA Petroleum Status Report (11am)

Premarket Update (Updated 9am eastern):

• Futures are slightly down.
• Asian markets were mixed ranging from -0.9% up to +0.5%
• Europe is down on average about -0.4% so far in early morning trading. 

Technical Outlook (S&P):

• The S&P continues to resist the urge to cover the gap from Tuesday's open. We didn't get any follow through yesterday, instead we rallied hard off of the day's lows and managed to consolidate price on the daily chart. 
• We managed, just barely, to close above the H&S neck line, as noted below, for a second straight day. 
• Volume was very light yesterday, and very abnormal to start a new year of trading. As a result it is difficult to get much in the way in terms of price movement and conviction. 
• The 30 minute chart shows a much more bearish outlook on the S&P, putting in a series of lower-lows and lower-highs. 
• The 5 minute chart has a weakening upward trend attached to it. 
• The next battle zone for the bulls will be to take out the 10/27 highs at 1293
• Quick stat to remember, when the S&P finishes higher during the first week of trading in a new year, then the odds say there is an 86% chance the market finishes higher on the year.

My Opinions:

• The market is making a very bullish move here, and a good chance we see the shorts get very uncomfortable and forced to cover their positions (adding more buying power to the markets) if we see price climb much  higher this week. 
• However, we need to see some more volume come into the picture, because without it, it puts a significant cloud of doubt over this price move and its ability to sustain it. 
• After Tuesday's rally, the S&P has gone from being neutral/bearish, to looking more bullish than anything. But keep in mind that Europe and their problems can erase that in a moment's notice. 

My Portfolio:

• 100% cash
• Traded TZA and TNA yesterday for small loss and came away with a small loss to the SharePlanner Model Portfolio. 
• I'll look to day-trade this market today, and even possibly add some swing-trades to the portfolio as well. 

The Chart: