Trading Plan for June 14, 2012

Economic Reports Due out (Times are EST): Consumer Price Index (8:30am), Jobless Claims (8:30am), Current Account (8:30am), EIA Natural Gas Report (10:30am)

Pre-market Update (Updated 8:30am eastern):

• US futures are flat ahead of the open. 
• European markets are trading -0.5% lower. 
• Asian markets traded on average -0.6% lower. 

Technical Outlook (SPX):

• SPX had the look of breaking out yesterday, but ultimately succumbed to the bears again by selling off into the close. 
• 5 days of consolidation and counting. So far it has the look of a bull-flag, but very choppy market nonetheless. 
• Despite yesterday’s sell-off the bulls really haven’t given up much in gains. 
• 1335 is the number the S&P needs to reach and close above to break out of the range bound trading of the last 5 days. A close above 1327 would help that cause as well. 
• Sold support remains at the 10-day moving average – testing it 3 out of 4 days. 
• Inverse head and shoulders forming over the past month – currently working on the right shoulder.
• IH&S pattern very obvious on the 30-minute chart.
• Market is coming off of short-term overbought conditions during this consolidation period. 
• Chopping above and below the 20-day moving average no true support/resistance there. 
• Volume remains relatively average. 
• The markets in general have pulled back roughly 10% off of its recent highs which is typically considered a “pullback” in the markets. 
• Major bottoms or at the least, interim bottoms, tend to make huge gains in the initial days following the bottom. See last October and September 2010. 
• Minor support at 1249, 1209 would also represent a level of price support, should we close below 1266 support. . 
• VIX is still elevated and rests above 23 – below 20 and the bear’s hopes for a break lower is greatly hampered. .

My Opinions & Trades:

• A bit cautious with creating new long positions because the crazy developments in Spain seem to be just now getting started. 
• Lots of chop in this market gives no clear edge to any side, I am becoming slightly bullish based on developing price patterns.
• Careful about trading in and out of this market too much – I’m playing with my original stop-losses which is usually 3-4% off of the entry price and gives me enough wiggle room to weather the choppiness of this market day-to-day. 
• Covered NUE at $36.04 from $36.67 for a 1.7% gain
• Covered GWW at $180.41 from $183.41 for a 1.6% gain. 
• No additional trades yesterday.
• Currently Long PPL at $27.65.

Charts: