Trading Plan for August 15, 2012

Pre-market update (updated 9:00am eastern):

• European markets are trading 0.4% lower. 
• Asian markets traded 0.6% lower.
• US futures are slightly lower ahead of the bell. 

Economic reports due out (all times are eastern): MBA Purchase Applications (7am), Consumer Price Index (8:30am), Empire State Manufacturing Survey (8:30am), Treasury International Capital (9am), Industrial Production (9:15am), Housing Market Index (10am), EIA Petroleum Status Report (10:30am)

Technical Outlook (SPX):

• Despite trading higher for most of the day, the SPX succumbed to a late day sell-off that finished the market slightly in the red. 
• Volume picked up some, but extremely low still. 
• Last 3 days in the market has shown sideways consolidation and a bit of distribution, leading me to believe we’ll probably push lower in the coming days. 
• Should a pullback occur, watch the 10-day moving average – its been a popular destination for bulls to reload at. 
• Since the pullbacks off the 6/4 bottom, the pullbacks have ranged around 30-60 points each time, which would give us a range of 1380-50.
• Choppy action on the 30-minute chart over the past 7 trading sessions. 
• Volume has become nearly obsolete and in line with holiday like volume. In fact volume has decreased 8 out of the last 10 sessions. 
• Such low volume levels leads me to believe that we may be weakening under the surface and that the slightest bit of bad news accompanied with volume will trigger a stop-order raid on the bulls. 
• The choppiness that has been a part of the trading action is due in large part to the low volume levels as well. 
• Short-term we’ve actually slightly dipped below overbought levels. 
• Next level for bulls to overtake is the 1422 recovery highs on the SPX. 
• It’s not uncommon to see large market rallies going into an incumbent re-election.
• 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 1358.
• SPX trading above all significant moving averages (10,20,50,200).
• VIX has moved below 15 for the first time since March but spiked noticeably higher yesterday (+8%)
• 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:

• Day-Traded UEC yesterday and sold at 2.38 from 2.31 for a 3% gain. 
• Sold OSK at $24.05 from $23.74 for a 0.31/share gain or +1.3%. 
• Moved my stop-loss in MDT up to $39.61. 
• 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 AIG at $32.46, MDT at 38.15 and AMZN at $233.90. Short BRO at $25.65, HE at $28.45, COG at $42.01
• 3 longs and 3 shorts in my holdings is just a way for me to weather a pullback that I think should come here fairly soon. 

Charts: