Trading Plan for April 13, 2012

Economic Reports Due out (Times are EST): Consumer Price Index (8:30am), Consumer Sentiment (9:55am), Bernanke Speaks (1pm)

Premarket Update (Updated 9:00am eastern):

• US futures are down moderately ahead of the open. 
  
• Asian markets traded between 0.7% and 1.8% higher. 
  
• European markets are trading between -0.5% and -1.4% lower. 
  

Technical Outlook (S&P):

• Yesterday’s monster rally took us right up to the underside of the rally off of the October lows, which acted as resistance. 
• The strength in the last two days is a text book retracement for bears to use for new shorting possibilities. 
• Nearly a 50% Fibonnacci retracement off of the recent highs. 
• We’ve come off of oversold price levels in the short-term.  
• The S&P recaptured the 50-day moving average. 
• 30-minute chart shows price action looking more like a retrace. 
• In order to rebound this market, the S&P needs to push back above 1393 where a descent amount of price resistance exists. 
• One thing that is very concerning to me is the fact that we have about 3 gaps, dating back to 3/6 that have yet to be filled by the markets. We now only have 1 gap remaining from 3/6
• One major concern for equities is the % of stocks that continue to trade below its 40-day moving average and that continues to drop daily. 

My Opinions:

• I think we are simply in a dead-cat bounce mode right now, my belief will change on this if we push through 1393 today. 
• Covered SWFT yesterday for a -3.4% loss – Still short RDC and added RDC as another new short opportunity at $33.99.
• I expect to add additional short positions today.
• Biggest obstacle for the bears will be trying to keep the dip buyers from taking advantage of recent weakness, particularly since there hasn’t been a pullback since December – this is their first opportunity to load back up. 
• This is one of the strangest markets that I’ve seen, because traditional indicators of market reversals or signs showing it being overheated are basically worthless right now. Euro dropping has been irrelevant, market negatives have been inconsequential. Much of the rally is in conjunction with favorable Fed policy that continues to allow for this eye-shattering rally. Which hasn’t that really been the case since March ’09?

Chart: