Trading Plan for August 17, 2012

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

• European markets are trading 0.3% higher. 
• Asian markets traded 0.8% higher.
• US futures are mixed ahead of the opening bell. 

Economic reports due out (all times are eastern): Consumer Sentiment (9:55am), Leading Indicators (10am)

Technical Outlook (SPX):

• Yesterday’s rally was quite a shocker for most market participants and broke out of the 5-day trading range. 
• The 10-day moving average has come right up underneath the bottom of price action. Use this level as the first support level for the markets should a pullback occur. 
• Volume picked back up yesterday, but still at historically low levels. If you take out volume for ETF’s and high frequency trading, there a relatively low amount  of traders in this market. 
• The next destination for this market is a move towards 1422  – which represents the recovery highs. 
• You may also see a pullback to 1405, which is the top consolidation range the market pulled out of. That too may offer a level of support for SPX as well. 
• We’ve managed to come off of overbought levels in the short-term. But remain extremely overbought longer-term. 
• 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 1390-60.
• With these low volume levels, continue to expect intraday choppiness in the market. 
• 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.
• 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 1361.
• 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:

• Stopped out of COG at $43.20 from $42.01 for a -2.8% loss. 
• Bought RHT at $57.27. 
• Stop-Loss in ARUN moved up to $17.10
• Stop-loss in AMZN moved up to $230.90
• Stop-loss in RHT move up to $56.70. 
• Moved my stop-loss in MDT up to $39.99. 
• Portfolio with the addition of RHT and removal of COG has given my portfolio a more bullish tilt 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 ARUN at $16.79, MDT at 38.15 and AMZN at $233.90. Short BRO at $25.65, HE at $28.45, COG.

Charts: