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Pre-market update (updated 4:30am eastern):

  • Europe is trading 1.0% lower.
  • Asian markets traded in mixed fashion, ranging from -0.9% up to +0.4%. 
  • US futures are trading moderately lower ahead of the bell.

Economic reports due out (all times are eastern): None

Technical Outlook (SPX):

  • Gap down markets: highly luring for the bears, but often a trap. Simply gap downs more times than not push lower for the first hour of trading and then miraculously recover and sometimes finish green on the day. 
  • Huge reversal on Friday's price action. 
  • If we indeed see a large pullback, 1430 would mark critical support as it represents the uptrend that we've been on since the 6/4 lows. 
  • While the 20-day moving average has been violated on a number of occasions, price action doesn't tend to drop that far below it before popping back higher again. 
  • Volume continues to remain on average. 
  • Most discouraging aspect about this market is the fact that it pushed above resistance at 1466 and then came back underneath it before the market's close. 
  • Another push above 1465, and ideally above 1474, would be bullish, and possibly lead to some squeezing of the bears
  • This would also create a 'higher-high' for the market which would be extremely important and pave the way for a test of 1500. 
  • Quickly approaching overbought conditions in the short-term, but not quite there yet. 
  • Failure to make a new higher in the near-term, would be indicative of a topping pattern in the broader market. 
  • We have a 10-20-day moving average crossover to the downside. Last time we saw this was in early September, and it marked a short-term bottom and subsequently bounced and sent the market nearly 80 points higher. 
  • Taking a look at the weekly chart of SPX, the conditions look very healthy with no signs of a near-term breakdown. 
  • For the bulls to build confidence among investors, there needs to be less of the intraday sell-offs. And the bears, if they really want this market to push lower, they need to take advantage of the intraday weakness it continues to get handed. 
  • VIX is trading below 15.
  • Fed's QE3 launch is going to add a lot of buying power to this market and drive more people out of interest-bearing assets and into equities in search of some kind of return. 
  • 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 1396 for a new lower-low in the market.  

My Opinions & Trades:

  • Day-traded JRCC from $2.98 to $2.99 for a 0.3% gain.
  • Stopped out of NTE at $10.72 from 11.38 for a -5.8% loss. 
  • Shorted DRC at $52.38
  • Remain long $WYNN at $115.42, TTM at $25.50, VZ at $45.68, SHLD at $54.48. 
  • Stop-loss tightened to $25.90 for TTM.
  • Stop-loss tightened to $45.80 for VZ.
  • Track my portfolio RealTime here.

Charts:

SP 500 Market Analysis 10-08-12

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ryan1Ryan (@shareplanner) specializes in swing trading strategies and is the founder of SharePlanner which he created to help and teach others on how to trade stocks better using multiple approaches and time frames. Each day you can count on Ryan to provide his trading advice as well as transparency in every trade that he makes. Ryan Mallory resides in Central Florida with a wife of seven years as well as one lively son. More >>

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