Trading Plan for July 18, 2012

Pre-market update (updated 8:30am eastern):

• European markets are trading 0.2% higher. 
• Asian markets traded -0.6% lower. 
• US futures are slightly lower ahead of the open.  

Economic reports due out (all times are eastern): MBA Purchase Applications (7am), Housing Starts (8:30am), Ben Bernanke Speaks (10am), EIA Petroleum Status Reports (10:30am), Beige Book (2pm)

Technical Outlook (SPX):

• Yesterday saw the dip buyers jump in and buy the intraday dip, after an initial sell-off from a gap-up. 
  • Yesterday showed that the bulls are still well in control of this market. 
• SPX needs to close above 1374 to extend the current rally. 
• A close below 1325 would create both a lower-high and a lower-low, and thereby turn the market bearish. 
• It didn’t take long but SPX is back into short-term overbought. 
  • Indices, including the Nasdaq and Russell, do not show this as of yet. 
• SPX running into resistance off of the double-top neckline that formed back in April ’12. Resistance is at 1363-5. May be a reloading area for the bears. 
  • Resistance shows up very well on the weekly chart (see below). 
• Weekly shows SPX coming off of overbought levels, ever so slightly. 
• There’s actually the possibility that we are forming a head and shoulders pattern on the daily chart when looking at the action from the past month. 
• Volume continues to provide low readings. 
• While we are coming off of overbought levels on the weekly chart, the SPRI shows a much more overbought market.
• After Thursday’s elongated lower shadow, I’ve decided to adjust the upward trend-line off of the 6/4 lows connecting it with that day’s lows. 
  • As a result, there is a well-defined channel that the market is trading in, and eliminates the bearish channel we had seen before. 
  • A break below 1333, would break the channel. 
• Huge doji candle on the weekly SPX – some might say its a shooting-star, but I’d disagree, as it occurred inside of last week’s candle body. 
  • Nonetheless, it does represent some indecision by the markets, as well as underlying weakness, evident by the long lower shadow off of the body of the candle. 
• The VIX remains under 17.
• 30-minute chart shows somewhat of an inverse head and shoulders pattern, and support at 1356. 
• Breaking through the 1390’s will be difficult as there are plenty of separate resistance levels in that area. 

My Opinions & Trades:

• Busy day of trading yesterday: Sold KKD at $6.75 from $6.61 for a 2.1% gain. 
• Closed out final half position in CMG at $400.39 from $378.44 for a 5.8% gain. 
• Covered URBN at $30.50 from $29.82 for a -2.3% loss. 
• Sold MLNX at $63.77 from $65.86 for a -3.2% loss. 
• Bought PCLN at $644.80
• Raising the Stop-loss in AGU to $91.20 from $87.99, and locking about $1.54/share in gains. 
• I’m in a position now, where I’m not really interested in expanding the # of holdings, instead I’ll look for opportunities to swap out non-performing trades with better trade opportunities. 
• Still long TPC at $12.43, NFLX at $82.76, AGU at $89.66, and CIE at $24.22.

Charts: