Trading Plan for August 22, 2012

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

• European markets are trading -1.1% lower. 
• Asian markets were off -0.7%.. 
• US futures are slightly lower ahead of the opening bell. 

Economic reports due out (all times are eastern): MBA Purchase Applications (7am), Existing Home Sales (10am), EIA Petroleum STatus Report (10:30am), FOMC Minutes (2:30pm)

Technical Outlook (SPX):

• For the first time in a long time we  saw a pullback after rallying strong in the morning, and a subsequent sell-off to finish lower on the day. 
• What’s significant about this is that it occurred after breakign above 1422. 
• At this point, I’d consider yesterday’s sell-off to be profit-taking and perhaps even a pre-determined profit-taking level in which once that 1422 level was triggered the wayve of selling orders came in an reversed the market. 
• Volume increased to the highest volume in weeks. 
• Watch the 10-day moving average today at 1409-10 – this has represented a regular point for dip buying in the market to occur. 
• It’s not uncommon if we consolidate below the 1422  resistance level for a while. You just don’t want to see a steep sell-off after touching the 1422 level. 
• We remain overbought both in the short and long-term time frames. 
• Strong spike in the VIX pushing it back  up above 15. 
• 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 1370.
• 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 MDT at $41.09 from $38.15 for a 7.7% gain. 
• Stopped out of AFFY at $16.89 from $17.26 for a -2.1% loss
• Day-traded XCO yesterday: sold at $7.43 from $7.63 for a loss of -2.6%
• Bought WOOF at $19.01
• 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.
• 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 LXP at $9.21, ARUN at $16.79, and AMZN at $233.90. Short BRO at $25.65, HE at $28.45.

Charts: