Trading Plan for April 23, 2012

Economic Reports Due out (Times are EST): None

Premarket Update (Updated 8:30am eastern):

• US futures are down more than -1% ahead of the opening bell. 
  
• Asian markets traded in a wide range from -0.2% all the way down to -1.8%. 
  
• European markets are seeing one of its worst days of the year so far down well over -2.6% on average. 
  

Technical Outlook (S&P):

• We continue to see the bears sell the market off despite intraday strength, just as we saw on Friday. 
• With this morning’s weakness we will gap down and out of the bear flag pattern that has been forming of late. 
• The 1357 lows on the S&P from 4/10 will be in play and tested today. 
• After 1357, the next significant level of support will be at 1340. 
• The bear flag pattern of late has taken us well off of oversold levels in the market. 
• On Friday, we saw the 10-day moving average cross back below the 50-day moving average. 
• A lot of talk about the ominous head and shoulders pattern on the S&P since mid-February. We are currently forming the right shoulder. 
• Notable was the inability to climb back above the 20-day moving average for the fourth straight day.
• The previous trend-line off of the October lows has become resistance for price action on the underside. 
• 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. 
• We now only have 1 gap remaining from 3/6 to be filled.

My Opinions:

• I think we are at a point that if the market can close at or near the day’s lows, we should then see the selling accelerate. 
• A recovery, where we significantly finish off the morning lows, would create a bounce scenario for the market this week. 
• Sold BLK on Friday at $190.50 from $196.97 for a 3.3% gain. 
• Added two additional short positions: RA at $20.68 and KCG at $13.09.
• I still hold four short positions in the portfolio: ABD from $11.17, BAK from $16.25, and CAG from $25.85.
• I remain bearish on this market going forward.
• 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: