Trading Plan for February 28, 2012

Economic Reports Due out (Times are EST): ICSC-Goldman Store Sales (7:45am), Durable Goods Orders (8:30am), Redbook (8:55am), S&P Case-Shiller HPI (9am), Consumer Confidence (10am), Richmond Fed Manufacturing Index (10am), State Street Investor Confidence Index (10am)

Premarket Update (Updated 8:30am eastern):

• US Futures are slightly higher heading into the open. 
  
• Asian markets traded between +0.4% and 1.7% higher. 
  
• European markets are trading about +0.3% higher. 
  

Technical Outlook (S&P):

• Just as predicted yesterday, the bulls bought the dip (doesn’t take a genius – trust me) and marched the indices parabolic intraday, and the consolidated into the close. We went from being strong in the red, to being a shade in the green. 
• 10-day moving average was tested again, and provided an opportunity to bounce and push higher. 
• 1370 will be in play for the bulls again today. Yesterday it broke above it twice, only to be met with selling pressures that pushed it underneath the multi-year resistance level. 
• Yesterday’s rally off the lows prevented an evening star pattern. 
• The last two days the S&P has made new highs in the market, but ironically, the VIX has moved higher as well – a significant bearish divergence. 
• A major sell-off would put the 20-day moving average in play, which will be much harder to push through than the 10-day MA, and one that hasn’t been broken in over two months. 1346 will be the key level for price to push through. Expect support to, at least initially, kick-in. 
• Volume was stronger when compared to Friday, but still below average. 
• 30-minute chart on the S&P still looks healthy with uptrend still in place. 
• We’ve yet to see a sell-off this year that exceeded 1% to the downside. 
• 1370, when looked through the prism of a 15-year chart, represents a very strong price level where markets have historically reversed at. 
• 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:

• Bears tend to perform the best when they don’t have to hold a gap down, and instead work with a flat or slightly positive open. Today you have that. 
• Never find yourself comfortable with profits on the short side, particularly when the market is trading in your favor, because the market continues to buy the dip at every junction. It’s the surest bet in the market right now. 
• Market appears sluggish to me. I don’t consider it consolidation, because it is still marching higher, but the intraday action in doing so, appears to be listless and with less conviction than before. 
• 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. 
• Rumors continue to drive market hype intraday, don’t be surprised by anything that you see. 

Chart: