• SP Market Analysis 7-20-12

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

  • European markets are trading -1.4% lower.. 
  • Asian markets traded in excess of -1.0% lower. 
  • US futures are moderately lower ahead of the open.   

Economic reports due out (all times are eastern): None

Technical Outlook (SPX):

  • SPX finally manged to break and close above 1374, thereby putting in a higher-high in the market yesterday. 
  • As it stands now, with this new ‘higher-high’ in place, the market becomes much more favorable for the bulls. 
  • Volume has increased, ever-so-slightly during the past 3 days. 
  • On 7/18 we managed to break through the descending trend-line off of the 4/2 highs (see chart below). 
  • 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. 
  • Weekly shows SPX coming off of overbought levels, ever so slightly. 
  • 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 16.
  • 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:

  • Decided to short FB at $28.94 as a high-beta hedge in this market. 
  • May use early morning weakness to buy some stocks off of the dip. 
  • 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. 
  • Raising the Stop-loss in PCLN to $644 from $630. 
  • Still long MDT at $38.47, TPC at $12.43, NFLX at $82.76, AGU at $89.66, PCLN at $644.80, and CIE at $24.22

Charts:

SP Market Analysis 7-20-12

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