Trading Plan for February 22, 2012

by Ryan Mallory

Economic Reports Due out (Times are EST): MBA Purchase Applications (7am), ICSC-Goldman Store Sales (7:45am), Redbook (8:55am), Existing Home Sales (10am)

Premarket Update (Updated 9:00am eastern):

• US Futures are slightly weaker heading into the open. 
  
• Asian markets traded higher - ranging from 0.3% up to 1.1%
  
• European markets are trading lower by about -0.5%.
  

Technical Outlook (S&P):

• S&P formed a spinning top/doji candle stick using a SPY chart. 
• All support levels are still held on the S&P
• Volume was light yet again. 
• Greece was downgraded by Fitch from "C" to "CCC" with default being considered "Highly Likely" - little material impact to the financial markets though. 
• 1370, when looked through the prism of a 15-year chart, represents a very strong price level where markets have historically reversed at. 
• The S&P has followed closely to the 10-day moving average since mid-December. However, the two breaks below that have occurred since, have meant very little for the bears. 
• The 20-day moving average looks like a very strong rising support level and at 1339, if that price level broke, would represent a dramatic shift in market sentiment. 
• We have yet to have a 1% pullback this year - the 13th longest such streak since 1928. 
• And yes....We remain firmly in overbought territory. 
• Hopefully Greece is behind the market now that they got their "agreement" (but doubt it). 
• 30-min chart shows an unwavering uptrend in place. 
• Price level support lies at 1326 and then again at 1300. A break of the latter in coming days would drastically change market behavior/outlook. 

My Opinions:

• I'm using January-February of last year as my analogue for trading this market - price action is nearly identical, as is the time frames too. With that being said, it is likely we see a pullback of worth here in the very near future. 
• Greece was more of a 'sell-the-news' event yesterday than anything else. 
• Market prices of late have primarily risen on hopes of a Greece bailout. Now that it is out of the way, there will need to be a new catalyst for the markets to take advantage of. So be careful, I would suggest the market is at a crossroads here. 
• Rumors continue to drive market hype intraday, don't be surprised by anything that you see. 
• 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.

Chart: