Trading Plan for August 1, 2012

Pre-market update (updated 8:30am eastern):

• European markets are trading in a mixed range from -0.3% up to +0.8%
• Asian markets in a mixed range from -0.9% up to +0.1%
• US futures are trading slightly higher ahead of the bell

Economic reports due out (all times are eastern): MBA Purchase Applications (7am), ADP Employment Report (8:15am), PMI Manufacturing Index (9am), Treasury Refunding Announcement (9am), ISM Manufacturing Index (10am), Construction Spending (10am), EIA Petroleum Status Report (10:30am), FOMC Meeting Announcement (2:15pm)

Technical Outlook (SPX):

• After making a higher-high on Friday, the SPX has put completed a bearish 3-day Evening Star price pattern. 
• I’m very concerned about getting heavily long at this juncture in the market, particularly with FOMC slated for 2:15pm today and employment on the horizon, that could become market catalysts to the downside. 
• Volume picked back up yesterday, after a dismal showing on Monday. 
• Markets remain in short-term overbought levels as well as on the weekly. 
• Very nice bull flag forming on the SPX 30-min chart. 
• VIX is a huge concern as it continues to spike higher despite the market being relatively flat during the same 2-day time period, sitting just a shade below 19.
• Trading on the first day of the month, typically sees some monster rallies and on lesser occasions, large sell-offs. Be prepared for a significant move today. 
• Resistance barriers have, including the down-trend off of the 4/2 highs, been broken on Friday. There aren’t any major resistance barriers in the near term for the SPX to face. Minor resistance lies around 1402-6. 
• Current uptrend support lies at 1337. 
• If another sell-off were to ensue, watch for a break and close below 1329 for a new lower-low in the market.  
• At this point, the goal for the bulls has to be to continue to trade higher and challenge the 1422 highs from 4/2 which are now well within reach. 
• Solid support formed at the 50-day moving average. 
• Of concern is the bearish crossover signal found in this week’s SharePlanner Reversal Indicator. Caution is warranted. 

My Opinions & Trades:

• Will be hesitant to add any new longs ahead of FOMC today. May add a new short just to add some balance. 
• Will let my current long stops play out. 
• Stopped out HES at $47.50 from $45.60 for a 4.2% gain. 
• Covered FB yesterday at 21.94 from 23.16 for a 5.3% gain. 
• Bought AMZN at $233.90
• Shorted CRI at $50.76
• Remain long WTW at $51.10, MDT. Short BRO at $25.65

Charts: