Trading Plan for July 19, 2012

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

• European markets are trading 0.7% higher. 
• Asian markets traded 1.2% higher. 
• US futures are moderately higher ahead of the open.  

Economic reports due out (all times are eastern): Jobless Claims (8:30am), Existing Home Sales (10am), Philadelphia Fed Survey (10am), Leading Indicators (10am), EIA Natural Gas Report (10:30am)

Technical Outlook (SPX):

• We finished just a shade below that critical 1374 resistance level. Today’s early morning pre-market strength has us gapping up and through this price level.
• By finishing above this price level, we’ll essentially put in a new higher-high in the market, but only the closing price matters. 
• Yesterday we managed to break through the descending trend-line off of the 4/2 highs (see chart below). 
• Weak jobless claims number may provide some headwinds for the market today .
• 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. 

SPX broke right through this resistance level yesterday. 

• Weekly shows SPX coming off of overbought levels, ever so slightly. 
• Not any more. 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. 
• Watch the SPRI – it shows a much more overbought market.
• After last 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. 
• 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:

• Bought MDT at $38.47.
• Did not close out any positions yesterday. 
• Raising the Stop-loss in AGU to $94.25 from $87.99, and locking about $6.26/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, PCLN at $644.80, and CIE at $24.22

Charts: