Trading Plan for June 18, 2012

Economic Reports Due out (Times are EST): Housing Market Index (10am)

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

• US futures are moderately lower ahead of the open, after giving up their modest overnight gains.  
• European markets are trading mixed/flat, with STOXX 50 trading -1.2% lower. 
• Asian markets traded on average 1.5% higher. 

Technical Outlook (SPX):

• Great day for the S&P on Friday as they managed to put in a ‘higher-high’ in the market, and establish an uptrend in the market off of the 6/4 lows
  • Though I wouldn’t consider it to be a strong one at this point.
• The opportunity exists (if we bounce off of the gap-down) for the S&P to test the 50-day moving average. 
• Quite a ways from current price, but ultimately, if the price can clear 1401 we’ll have a market that is very bullish. 
  • Represents the slightly descending resistance level off of the 4/2/12 highs. 
• SPX confirmed the inverse head and shoulders pattern on Friday. 
• Of late, respectable support lies at the 10-day moving average. 
  • Has touched it multiple times in the past 2 weeks and held each time. 
• IH&S pattern very obvious on the 30-minute chart.
  • Confirmed on Friday.
• SPX is no longer overbought. 
• 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. 
  • Measured by recent highs to its most recent lows. 
• A break below 1306 would represent a resumption of the downward trend. 
• VIX is still elevated and rests above 21 – below 20 and the bear’s hopes for a break lower is greatly hampered. However, it did take a pretty solid hit yesterday. 

My Opinions & Trades:

• If we bottom out and show signs of filling the morning gap down, I’ll look to add 1-2 new long positions to the portfolio. 
• 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. 
• Bought WNR at $20.51 on Friday
• Bought VCI at $19.41 on Friday. 
• I am still long PPL at $27.65 and PCYC at $40.66

Charts: