Trading Plan for April 19, 2012

Economic Reports Due out (Times are EST): Jobless Claims (8:30am), Bloomberg Consumer Comfort Index (9:45am), Existing Home Sales (10am), Philadelphia Fed Survey (10am), Leading Indicators (10am), EIA Natural Gas Report (10:30am), 

Premarket Update (Updated 9:00am eastern):

• US futures are flat ahead of the opening bell. 
  
• Asian markets traded in a range from -0.8% up to +1%. 
  
• European markets are trading mixed/flat.
  

Technical Outlook (S&P):

• Yesterday saw the bulls give back a small amount of their gains but was kept to a minimum.
• Notable was the inability to climb back above the 20-day moving average for the second straight day, and the bear flag that is forming on the S&P over the last six days on the daily chart. 
• The previous trend-line off of the October lows has become resistance for price action on the underside. 
• S&P is actually nearing short-term overbought levels. 
• If bearishness resumes, watch 1357. If we break this level, the next major test is around 1340.
• Bulls need to get price back above 1401. 
• On the weekly chart, we confirmed the bearish wedge pattern that we had been following for weeks. Very bearish development for the market. 
• 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:

• The bulls are in a “Show-Me” mode – it needs to prove that it can recover from the recent market bearishness. 
• Three new positions in the portfolio: Short ABD from $11.17, BAK from $16.25, BLK from $196.97. 
• Still holding (shorting) RDC from $33.99 and CAG from $25.85.
• I still have a bearish stance on this market, but won’t hold it for long if we  rally again 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:

Check out yesterday’s market wrap-up video for my charting out the S&P.