Trading Plan for August 16, 2012

Pre-market update (updated 8:00am eastern):

• European markets are trading mixed/flat. 
• Asian markets traded 1.7% higher.
• US futures are slightly higher ahead of the bell. 

Economic reports due out (all times are eastern): Housing Starts (8:30am), Jobless Claims (8:30am), Philadelphia Fed Survey (10am), E-Commerce Retail Sales (10am), EIA Natural Gas Report (10:30am)

Technical Outlook (SPX):

• The SPX managed to creep higher, just barely, but remain within a 5-day consolidated range. 
• Volume dropped back down to Tuesday’s extremely low levels. 
• We’ve managed to come off of overbought levels in the short-term. But remain extremely overbought longer-term. 
• Last 5 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.
• With these low volume levels, continue to expect choppiness in the market. 
• 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. 
• 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 1359.
• 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 on Tuesday (+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 AIG yesterday at $34.05 from $32.46 for a 4.9% gain. 
• Bought ARUN at $16.79 yesterday.
• Moved my stop-loss in MDT up to $39.61. 
• Keeping a perfectly hedged portfolio, until we get a better feel for market direction going forward. 
• 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 MDT at 38.15 and AMZN at $233.90. Short BRO at $25.65, HE at $28.45, COG at $42.01

Charts: