Trading Plan for August 6, 2012

Pre-market update (updated 7:00am eastern):

• European markets are trading 0.3% higher on average.
• Asian markets traded 1.8% higher. 
• US futures are trading slightly higher. 

Economic reports due out (all times are eastern): Ben Bernanke speaks (9am), Treasury STRIPS (3pm)

Technical Outlook (SPX):

• Amazing day for the markets, where after 4 days of straight selling, the SPX wiped out all 4 days of and formed an intraday higher-high in the markets. 
• SPX finished right below the downtrend off of the 4/2 highs.
• Needs to see some continuation today to see a close for the first time above that downtrend. 
• Last time we experienced a large bounce off of a 4-day pullback (7/26) the large rally was followed up up with another substantial gain the next day too. 
• We could be setting up for a run to 1422 which would mark new recovery highs for the market. 
• One area of concern are the 3 large gaps off of the 6/4 lows that remain unfilled, including 6/6, 7/26, 8/3
• The lows from 8/2 was a 61.8% Fibonacci retracement and 26 points off of the previous highs.
• 1391 will represent resistance for the markets as the recent high for the markets to try closing above. 
• We’ve come well off of the short-term overbought levels in the market, but on the weekly/mid-term we are still overbought. 
• At this point, uptrend support rests at 1345.
• SPX trading above all significant moving averages (10,20,50,200).
• VIX was crusted on Friday dropping back below 16. 
• If another sell-off were to ensue, watch for a break and close below 1329 for a new lower-low in the market.  
• Downside reversal signal still remains intact on the SharePlanner Reversal Indicator. 

My Opinions & Trades:

• Covered BAC at $7.37 from $7.14 for a -3.2% loss. 
• Shorted MBI at $9.17
• Long PWER at $5.05
• Depending on how we close today, I may end up closing out 2 of the 3 short positions. 
• May add to my current long holdings today with 1-2 new positions. 
• Remain long MDT and AMZN at $233.90. Short BRO at $25.65 and CRI at $50.76

Charts: