Trading Plan for August 8, 2012

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

• European markets are trading 0.5% lower. 
• Asian markets traded 0.8% higher. 
• US futures are trading slightly lower. 

Economic reports due out (all times are eastern): MBA Purchase Applications (7am), Productivity and Costs (8:30am), EIA Petroleum Status Report (10:30am)

Technical Outlook (SPX):

• After seeing the SPX sell-off 4 straight days last week, we are now attempting to move higher for the 4th straight day this week. 
• SPX managed to close above the mental hurdle of 1400 yesterday, and poised to make a move to 1422 and challenge the year’s highs. 
• Market is back to being short-term overbought after rallying more than 35 points in 3 days. 
• Biggest news so far this week, technically, has been the SPX breaking out of the descending trend-line off of the 4/2 highs (as noted below). 
• Volume continues to be extraordinarily light over the past few days and if you compare it to this time last year, it is as much as 30% less. 
• It’s not uncommon to see large market rallies going into an incumbent re-election – (post later on this today).
• Very strong rally in place on the 30min chart of the SPX.
• If you look at the 4 previous higher-highs in the market since the 6/4 bottom, then one could conclude that we’ve reached another temporary top, and are prime for another pullback. 
• 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
• At this point, uptrend support rests at 1350.
• SPX trading above all significant moving averages (10,20,50,200).
• VIX has now bucked the trend during the last two trading sessions – should be of concern for the bulls as a divergence. 
• If another sell-off were to ensue, watch for a break and close below 1354 for a new lower-low in the market.  
• Downside reversal signal still remains intact on the SharePlanner Reversal Indicator. 

My Opinions & Trades:

• Covered CRI at $51.94 from $50.76 for -2.3% loss. 
• Bought AIG yesterday at $32.46
• If the market shows signs of getting top heavy and a possible pullback, I may consider adding 1-2 short positions to hedge my 5 current long positions. 
• Remain long RHT at $56.19, CNQ  at $28.78, MDT at 38.15 and AMZN at $233.90. Short BRO at $25.65

Charts: