Trading Plan for August 3, 2012

Pre-market update (updated 7:30am eastern):

• European markets are trading 2.2% higher on average.
• Asian markets traded -0.8% lower. 
• US futures are trading nearly 1% higher ahead of the bell. 

Economic reports due out (all times are eastern): Employment Situation (8:30am), ISM Non-Manufacturing Index (10am)

Technical Outlook (SPX):

• SPX is looking to bounce after a four-day pullback in the SPX
• Yesterday, price closed just a shade above the 10-day moving average and managed to bounce off of the 20-day MA as well. 
• The lows from yesterday was a 61.8% Fibonacci retracement and 26 points off of recent highs. Respectable bounce off of the intraday lows yesterday, erasing 1/2 of the day’s losses.  
• 1391 will represent minor resistance today, should we rally that high. 
• We’ve come well off of the short-term overbought levels in the market, but on the weekly/mid-term we are still overbought. 
• Selling over the past four days in the market have not shown must panic or concern at this point. 
• At this point, uptrend support rests at 1345.
• SPX trading above all significant moving averages (10,20,50,200).
• Despite yesterday being the largest of the 4-day sell-off period, volume was also light. 
• VIX indicator diverged signficantly yesterday dropping over -7% despite the market being down as well. 
• Resistance barriers have, including the down-trend off of the 4/2 highs, been broken on Friday. There aren’t any major resistance barriers in the near term for the SPX to face. Minor resistance lies around 1402-6. 
• If another sell-off were to ensue, watch for a break and close below 1329 for a new lower-low in the market.  
• At this point, the goal for the bulls has to be to continue to trade higher and challenge the 1422 highs from 4/2 which are now well within reach. 
• Of concern is the bearish crossover signal found in this week’s SharePlanner Reversal Indicator. Caution is warranted. 

My Opinions & Trades:

• Covered SONC yesterday at $9.27 from $9.74 for a 4.8% gain. 
• Added BAC short at $7.14.
• My portfolio tilts slightly bearish with 3 shorts and 2 longs. 
• Remain long MDT and AMZN at $233.90. Short BRO at $25.65 and CRI at $50.76
• If today’s bounce holds, I’ll likely close out some of my shorts and align myself more bullish for next week in my portfolio. 

Charts: