Trading Plan for February 9, 2012

by Ryan Mallory

Economic Reports Due out (Times are EST): Jobless Claims (8:30am), Bloomberg Consumer Comfort Index (9:45am), Wholesale Trade (10am), EIA Natural Gas Report (10:30am)

Premarket Update (Updated 9am eastern):

• US Futures are slightly higher heading into the open.
  
• Asian markets were flat/mixed.
  
• European markets are up about 0.6% overall
  

Technical Outlook (S&P):

• S&P and Nasdaq continue a slow melt up, as the intraday dips consistently get bought up. Russell is showing some very nice consolidation at current price levels
• There is still a large gap that has yet to be filled on the S&P from the 2/3 gap up.
• Volume was slightly better than the prior day, but still trading below average.
• The S&P is well overbought now on the daily, weekly, and monthly charts.
• Be aware of the extended rally we've been on and how it compares to historical measures.
• Any major rally at this point will allow us to challenge the 5/2 Bin Laden Recovery highs at 1370.
• Trend-line support is at 1300 off of the 11/28 lows. 

My Opinions:

• While recognizing a lot of head winds facing the market from an economic standpoint, the market seems to be pricing everything that we know and expect about the European crisis, and with a solid earnings season as well as easing by the Fed, we could see continued price appreciation this year (particularly with an incumbent President up for re-election).
• The daily price action, beyond the obvious 'buy-the-dip" action has been to breakout and move higher, followed by a few days of consolidation and slight pullback. Rinse and repeat.
• Sideways trading over the next few days wouldn't surprise me in the least bit here, even over the new week or so. In fact, it would be considered healthy for the markets to do so. 
• We have yet to see the "buy-the-dip" mentality cease. Each market open where weakness is present, the bulls buy the open, no matter what, and recovers most if not all of the day's losses. As long as this persists, the bears do not stand a chance, and the bull rally will prevail.

Chart: