Trading Plan for February 15, 2012

Economic Reports Due out (Times are EST): MBA Purchase Applications (7am), Empire State Manufacturing Survey (8:30am), Treasury International Capital (9am), Industrial Production (9:15am), Housing Market Index (10am), EIA Petroleum Status Report (10:30am), FOMC Minutes (2pm)

Premarket Update (Updated 9am eastern):

• US Futures are moderately higher heading into the open. 
  
• Asian markets saw over 2% in gains.
  
• European markets were  up roughly 0.8% on average. 
  

Technical Outlook (S&P):

• Despite a steady and consistent sell off for most of the day, the market in the last 30 minutes wiped out the entire day’s weakness on Greece Rumors. 
• Essentially all that happened yesterday was that the gap-up from the previous day was filled. The S&P bounced off of the 10-day moving average and rallied  higher. 
• With the early morning weakness, the S&P is set to open at new recent highs, and potentially stage a rally to the Bin Laden 5/2/11 highs. 
• If today’s early morning weakness holds, watch support at the 10-day moving average which should be around 1347
• After that, price support lies at 1326 and then again at 1300. A break of the latter in coming days would drastically change market behavior/outlook. 
• 30-min chart over the past few days, is starting to look ‘toppy’.
• Volume picked back up, but was still weak, as has been the case for the entire year. 
• We are coming off of short-term overbought conditions. 
• The SharePlanner Reversal Indicator finally gave us a reversal signal both on the daily and weekly indicators. 

My Opinions:

• Rumors continue to drive market hype intraday, don’t be surprised by anything that you see. 
• The market seems like it needs to go down some before it can legitimately make another significant move higher. A nice shakeout of bulls from their current positions would go a long ways into forming the next leg up in the market. 
• While recognizing a lot of head winds facing the market from an economic standpoint, the market seems to be pricing everything that we know and expect about the European crisis, and with a solid earnings season as well as easing by the Fed, we could see continued price appreciation this year (particularly with an incumbent President up for re-election).
• The daily price action, beyond the obvious ‘buy-the-dip” action has been to breakout and move higher, followed by a few days of consolidation and slight pullback. Rinse and repeat.
• We have yet to see the “buy-the-dip” mentality cease. Each market open where weakness is present, the bulls buy the open, no matter what, and recovers most if not all of the day’s losses. As long as this persists, the bears do not stand a chance, and the bull rally will prevail.

Chart: