Trading Plan for June 21, 2012

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

• US futures are slightly down ahead of the open.
• European markets are trading mixed/flat. 
• Asian markets traded in a wide range from -1.3% up to +0.9%

Economic Reports Due out (Times are EST): Jobless Claims (8:30am), PMI Manufacturing Index Flash (8:58am), Existing Home Sales (10am), Philadelphia Fed Survey (10am), FHFA House Price Index (10am), Leading Indicators (10am), EIA Natural Gas Report (10:30am)

Technical Outlook (SPX):

• SPX finally had a pullback yesterday that was done in a controlled and mild manner. 
  • Uptrend still remains in place.  
• We could see a pullback to 1340 today without affecting the the uptrend currently in place. 
• Market remains short-term overbought, and tends to remain in that area for weeks and months if the SPX’s uptrend is indeed legit. 
• 50-day moving average yesterday ended up being the zone for the market’s bounce off lows. 
• 1360 resistance will be in play again today. 
  • After that resistance level is cleared, then our next resistance level hovers at 1401 – represents the slightly descending resistance level off of the 4/2/12 highs.
• The FOMC Statement became a non-news event. 
• 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. 
• 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. 
• 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). 
• SPX confirmed the inverse head and shoulders pattern last 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. 

30-minute chart showing a solid uptrend is in place. 

• A break below 1306 would represent a resumption of the downward trend. 
• VIX, despite yesterday’s sell-off, continued to drop all the way down to 17. 

My Opinions & Trades:

• Yesterday’s pullback looks like a solid opportunity for buying stocks on the dip – not a reason for panic.
• 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. 
• Sold VCI yesterday at $20.40 from $19.41 for a 5.1% gain. 
• Sold BX yesterday at $14.10 from $13.71 for a 2.8% gain. 
• Bought AH at $12.50
• I am still long AMZN at $221.60, CHD at $53.95, PCYC at $40.66, WNR at $20.51

Charts: