Trading Plan for February 23, 2012

Economic Reports Due out (Times are EST): Jobless Claims (8:30am), Bloomberg Consumer Comfort Index (9:45am), FHFA House Price Index (10am), EIA Natural Gas Report (10:30am), EIA Petroleum Status Report (11am), Kansas City  Fed Manufacturing Index (11am), 

Premarket Update (Updated 9:00am eastern):

• US Futures are slightly higher heading into the open. 
  
• Asian markets traded mixed ranging from -0.8% up to +0.5%
  
• European markets are trading flat and in mixed fashion.
  

Technical Outlook (S&P):

• Yesterday, the market completed the Evening Star Candle pattern which forms over a 3-day period. This candle patterns is typically followed by additional weakness in the market. 
• There has yet to be any aggressive sign of selling by the bears over the past two months and the market in general appears to be getting very listless and complacent. 
• All support levels are still held on the S&P
• Volume was light yet again. 
• 1370, when looked through the prism of a 15-year chart, represents a very strong price level where markets have historically reversed at. 
• 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 1342, 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. 
• We remain firmly in overbought territory. 
• 30-min chart has looked a bit weaker in recent days, but overall still on the uptrend. 
• 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:

• Still no conviction by the bears, even yesterday. The selling has been very lackluster.
• I’m using January-February of last year as my analogue for trading this market – price action is nearly identical, as is the time frames too. With that being said, it is likely we see a pullback of worth here in the very near future. 
• 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. 
• 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: