Trading Plan for June 20, 2012

Economic Reports Due out (Times are EST): MBA Purchase Applications (7am), EIA Petroleum Status Report (10:30am), FOMC Meeting ANnouncement (12:30pm), FOMC Forecasts (2pm), Chairman Press Conference (2:15pm)

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

• US futures are flat ahead of the open.
• European markets are trading mixed/flat. 
• Asian markets traded on average 1.1% higher.

Technical Outlook (SPX):

• The market gave us a solid 1% move yesterday.
  • We saw price on SPX cross and finish above the 50-day moving average. Very bullish. 
• The move off of the June 4th lows is very similar to the bullishness that we saw in October of last year and September 2010. 
• Next level of resistance lies in the 1365-68 range. It’s not major resistance, but worth noting nonetheless.
• Also important is the angle of the 10-day moving average, when it turns suddenly steeper in slope like it has over the past four trading sessions, it can be a good indication that the market is ready to rally for an extended period of time. 
  • By steep I mean by more than 45 degrees. Refer to price action from late December 2011 and January 2012. 
• We are right back in overbought territory, but the thing is, if the market is indeed on a strong run, it can stay in this area, for quite a while. 
• Yesterday we pushed a shade outside of the upper Bollinger-Band – something I’m not a big fan of. If this continues in a more aggressive manner, I will likely book gains faster than originally anticipated. 
  • Large moves outside of the Bollinger Bands usually leads to hard pullbacks. 
• There is now an established uptrend in place on SPX off of the 6/4 lows with consecutive higher-highs and higher-lows now (two of each). 
• FOMC statement comes out at 12:30pm est today – expect a lot of volatility to come with it in anticipation of further easing. 
• 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.
• Volume was fairly light yesterday.
• A break below 1306 would represent a resumption of the downward trend. 
• VIX is back below 20 and is a bullish development for the market. 

My Opinions & Trades:

• I don’t see, based on the charts, any notable reasons to be short this market. 
  • I can tell you a million economic/fundamental reasons, but as a chartist, I have to leave personal biases behind, and simplify read the charts. 
• I’d like to wait for a controlled, light volume pullback to go higher than my current portfolio of 6 positions. 
• Closed PPL at $27.97 from $27.65 for a 1.2% gain. 
• Bought CHD at $53.95.
• I am still long AMZN at $221.60, BXS at $13.71, PCYC at $40.66, WNR at $20.51, VCI at $19.41

Charts: