Trading Plan for January 12, 2012

Economic Reports Due out (Times are EST): Jobless Claims (8:30am), Retail Sales (8:30am), Bloomberg Consumer Comfort Index (9:45am), Business Inventories (10am), EIA Natural Gas Report (10:30am), Treasury Budget (2pm)

Premarket Update (Updated 9am eastern):

• Futures are slightly positive.
• Asian markets were down about 0.5% on average. 
• Europe is showing positive gains, ranging from 0.2% up to 1.4%.

Technical Outlook (S&P):

• We were up a descent amount prior to the jobless claims and retail number, and then we saw negative market reaction when both reports missed noticeably. Such a reaction from the market hasn’t been seen in weeks. 
• There still remains unfilled gaps from 11/28, 1/3, and 1/10. The latter two would make it seem likely that we need them to be filled before we can have any substantial move upward. 
• Big key/clue to today’s market will be whether the bulls can take the negative news reports in jobless claims and retail and actually move higher. If so, this market may have more left in the tank, but if not, there’s a good chance, we’ll see weakness in coming days. 
• If we are to get a pullback in coming days, I could see it easily taking us to 1230-1240 area where there is upward trending support off of the October lows. 
• The downtrend formed off of the 5/2/11 highs would represent the next level of resistance which is currently at 1314.
• Index charts are overbought, and look poised for a correction in the coming days. 
• Volume remains non-existent on most charts, and below average still on the S&P.
• The bulls are still showing an inability to break through and close above the October highs.  Let’s see how we do in this regard today. 
• On the 30 minute chart we are showing another 30-minute flag similar to the pattern  we saw prior to Tuesday’s rally. 

My Opinions:

• I’m looking for a short-term bearish move to work off overbought conditions.
• There seems to be heightened risk going long in this market, at this juncture. Extremely overbought. If you want to get long on this market beyond day-trading, wait for a cooling period first.  
• Some divergences occurring with indicators and price, where stochastics and RSI, for example,  did not make a move higher with the price action that we saw, showing the potential for a false breakout. 

My Portfolio:

• 20% Short
• Holding TZA overnight with a buy in price at $23.87.
• I’ll look to day-trade this market today, and even possibly add some swing-trades to the portfolio as well. 

Chart: