Daily Trading Plan for December 13, 2011

Economic Reports Due out (Times are EST): NFIB Small Business Optimism Index (7:30am), ICSC-Goldman Store Sales (7:45am), Retail Sales (8:30am), Redbook (8:55am), Business Inventories (10am), FOMC Statement (2:15pm)

Premarket Update:

• Futures are moderately higher heading into the open.
• Asia was down -1% overall in trading.
• Europe is currently trading higher at an average 0.8%.

Technical Outlook:

• For the third straight day we reversed from the previous day’s action in a significant manner. With the morning’s positive bias, the market is looking at making it a fourth straight day.
• The most interesting development out of yesterday was the fact that the VIX was down over 2% despite the S&P dropping -1.5%. Typically the VIX would be noticeably up on such a day.
• S&P dropped below the 10-day moving average yesterday and closed just above the 20-day.
• The 200-day moving average continues to act as a problem for the S&P at 1262, watch for whether price can close above this level.
• The 30-min chart of the S&P portrays a well-defined bull flag that we’ve been in since late November.
• A move below 1225 on the S&P would accelerate the selling in the market from what we saw yesterday.
• Trend-line off of the 7/7 highs, just above the 200-day MA on the S&P, continues to act as resistance to price as well.
• Gap-up/gap-downs continue to dominate (or plague) this market and limiting intraday moves during market hours.
• Note the larger downward channel that we are in as noted below.

My Opinions:

• 30 min chart has a bullish tone, but its only 12 or so points from looking very bearish.
• With this morning’s early morning strength, it is putting at stake my prospects for additional follow through, but still confident we’ll get that today.
• The Fed issues its statement at 2:15pm today, and the often leads to some strange price action which is impossible to predict. I may look to get out of my existing positions before the announcement.
• The only way I could bring myself to adjust my bearish outlook on this market is if we break above the aforementioned trend-line. Then the entire outlook would be different for the market.
• Using the trend-line I like the risk here – which if very limited. Reward looks significant, should the market fail to breakout.
• Volume tapered off yet again yesterday.

My Portfolio:

• 25% Short
• Closed Edward Life Sciences (EW) yesterday for about 0.8% in gains, and traded TNA multiple times for small gains as well.
• Added ProShares UltraShort Crude Oil (SCO) and UltraPro Short S&P 500 (SPXU) at the close.

The Chart: