Trading Plan for August 13, 2012

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

• European markets are trading in a mixed fashion. 
• Asian markets traded mixed/flat. 
• US futures are trading break-even.  

Economic reports due out (all times are eastern): None

Technical Outlook (SPX):

• Late afternoon rally managed to lift the markets into positive territory for a sixth consecutive day. 
• Volume, despite the strength in the market, is seeing holiday-like volume, which to put it plainly, is incredibly weird. 
• We remain well-overbought on all time frames. 
• If we were to rally for a 7th day in a row, it would be an event that hasn’t happened in years. 
• Watch the 10-day moving average for minor support at 1390. 
• The six-day rally the market is on, hasn’t occurred since 3/7-3/12. 
• However, the gains that are being made are sluggish at best, and without much fanfare. 
• Setting up for a pullback at the very least heading this week as buyers seem to be lacking conviction at these levels (just look at…yes…volume!)
• SPX poised to make a move to 1422 and challenge the year’s highs. 
• It’s not uncommon to see large market rallies going into an incumbent re-election.
• 30-min chart has us primarily trading in a sideways channel. 
• If you look at the 4 previous higher-highs in the market since the 6/4 bottom, then one could conclude that we’ve reached another temporary top, and are prime for another pullback. 
• One area of concern is the 3 large gaps off of the 6/4 lows that remain unfilled, including 6/6, 7/26, 8/3
• At this point, uptrend support rests at 1355.
• SPX trading above all significant moving averages (10,20,50,200).
• VIX has moved below 15 for the first time since March. 
• If another sell-off were to ensue, watch for a break and close below 1354 for a new lower-low in the market.  

My Opinions & Trades:

• Bought EL at $55.07 on Friday
• Moved my stop-loss in MDT up to $39.61. 
• Bought OSK at $23.74. 
• Going to consider any sell-off as opportunities to buy stocks on the cheap. Dip buying should be the norm until a lower-low is put in place.
• Remain long OSK at $23.74, RHT at $56.19, AIG at $32.46, MDT at 38.15 and AMZN at $233.90. Short BRO at $25.65, HE at $28.45

Charts: