Trading Plan for February 21, 2012

Economic Reports Due out (Times are EST): Chicago Fed National Activity Index (8:30am)

Premarket Update (Updated 9:00am eastern):

• US Futures are slightly green heading into the open. 
  
• Asian markets were mixed in trading.
  
• European markets are trading lower by about -0.5%.
  

Technical Outlook (S&P):

• Today’s open will encompass the gains from Monday while the market was closed as well as last night and this morning’s futures trading. 
• 1370, when looked through the prism of a 15-year chart, represents a very strong price level where markets have historically reversed at. 
• Watch the highs from last year on 5/2/11 to potentially be tested, which also rests at 1370. 
• Volume was higher on Friday, mostly due to it being options expiration. 
• The S&P  has followed closely to the 10-day moving average since mid-December. However, the two breaks below that have occurred since, have meant very little for the bears. 
• The 20-day moving average looks like a very strong rising support level and at 1337, if that price level broke, would represent a dramatic shift in market sentiment. 
• We have yet to have a 1% pullback this year – the 13th longest such streak since 1928. 
• And yes….We remain firmly in overbought territory. 
• Hopefully Greece is behind the market now that they got their “agreement” (but doubt it). 
• 30-min chart shows a solid uptrend in place. 
• Price level support lies at 1326 and then again at 1300. A break of the latter in coming days would drastically change market behavior/outlook. 

My Opinions:

• Early morning action in the S&P and Euro suggests we may see today become a sell-the-news event. 
• Market prices of late have primarily risen on hopes of a Greece bailout. Now that it is out of the way, there will need to be a new catalyst for the markets to take advantage of. So be careful, I would suggest the market is at a crossroads here. 
• Rumors continue to drive market hype intraday, don’t be surprised by anything that you see. 
• 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.

Chart: