Trading Plan for August 21, 2012

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

• European markets are trading 0.4% higher. 
• Asian markets traded in a mixed/flat manner. 
• US futures are slightly higher ahead of the opening bell. 

Economic reports due out (all times are eastern): ICSC-Goldman Store Sales (7:45am), Redbook (8:55am)

Technical Outlook (SPX):

• We saw dip buyers jump in after establishing the lows from the first hour’s trading today. 
• Volume was incredibly low today. Interesting tidbit – while the SPY hit a 52-week high, its volume hit a 52 week low. 
• We’ll once again look to challenge the 1422 level to see whether we can break through resistance and post new recovery highs. 
• It’s not uncommon if we consolidate below this resistance level for a while. You just don’t want to see a steep sell-off after touching the 1422 level. 
• The 10-day moving average is trailing price nicely and is offering solid support, but is close to parabolic. 
• We remain overbought both in the short and long-term time frames. 
• VIX is at unbelievably low levels that  haven’t been seen since 6/2007 – currently it sits at 14. 
• 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 before eventually breaking through 1422. 
• 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 1368.
• SPX trading above all significant moving averages (10,20,50,200).
• 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:

• Sold RHT yesterday at $58.27 from 57.27 for a 1.7% gain. 
• Bought AFFY at 17.26
• Bought LXP at $9.21
• Current stop-losses have been adjusted across the board. 
• Stop-Loss in ARUN moved up to $17.07
• Stop-loss in AMZN moved up to $236.00.
• HE Short stop-loss has been has been tightened to 27.73. 
• BRO Short stop-loss has been has been tightened to 25.85.
• Moved my stop-loss in MDT up to $40.37. 
• 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.

Charts: