Trading Plan for April 17, 2012

Economic Reports Due out (Times are EST): ICSC-Goldman Store Sales (7:45am), Housing Starts (8:30am), Redbook (8:55am), Industrial Production (9:15am)

Premarket Update (Updated 9:00am eastern):

• US futures are moderately higher ahead of the opening bell. 
  
• Asian markets traded slightly lower.
  
• European markets are trading about 1% higher. 
  

Technical Outlook (S&P):

• Yesterday’s sell-off into the close puts recent lows at 1357 in play. If we break this level, the next major test is around 1340. 
• We saw the market peak above the 50-day moving average but unable to sustain that MA. 
• Today’s strength in the pre-market could prove troublesome if the bulls can put together a sizable rally off of it today. Watch the 10-day moving average, which it hasn’t broke at all during this recent downturn. It could represent a subtle shift in sentiment. 
• On the weekly chart, we confirmed the bearish wedge pattern that we had been following for weeks. Very bearish development for the market. 
• We’ve come off of oversold price levels in the short-term.  
• In order to rebound this market, the S&P needs to push back above 1388 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

My Opinions:

• As long as price stays below Friday’s highs, I would say any bounce is worth shorting.
• I’m somewhat surprised by the early strength in the market this morning. Could easily blow up and into a strong rally for the bulls.  
• Friday’s and yesterday’s panic sale into the close tells me that the bulls are getting nervous holding their long positions and that they can be easily shaken out of their holdings. 
• Sold SPRD at 17.10 for a -3.3% loss, but day-traded TLB at $2.71 and sold it at $2.84 for a 4.8% gain. 
• I also added CAG to the portfolio as a short at $25.85.
• Holding shorts in HOTT at $9.85, DOW at $33.47, APD from 87.84 and RDC from $33.99.
• 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: