Trading Plan for March 12, 2012

Economic Reports Due out (Times are EST): Treasury Budget (2pm)

Premarket Update (Updated 8:00am eastern):

• US Futures are flat ahead of the employment number. 
  
• Asian markets traded slightly negative.
  
• European markets are trading in mixed/flat fashion.
  

Technical Outlook (S&P):

• The S&P has gapped its way higher of late off of Tuesday’s lows. 
• Volume over the last three days has been below average. 
• Huge hanging man pattern on the S&P weekly chart – very bearish. 
• Bullish island reversal pattern on the daily SPY chart. 
• Bulls will be looking to get price action above 1378 as quickly as possible. 
• The bears will need to get back below the 20-day moving average in short-order. 
• A break of Tuesday’s lows would signify the last three trading sessions of market strength being nothing more than a dead cat bounce and will lead to further action to the downside.  
• The 30-minute chart looks parabolic over the last three days, and starting to look exhausted. 

My Opinions:

• I wouldn’t rule out additional good news from the Fed this week – they have an unbelievable ability to play to the crowd and tell them exactly what they want to hear at the expense of long-term sustainability. 
• Fed announcing a new form of QE Wednesday, just shows you how difficult it is for anyone to short this market. Fighting the Fed, when they act this aggressive, ends up being a losing battle. 
• I’m using January-February of last year as my roadmap for trading this market – price action is nearly identical, as is the time frames too. With that being said, it is likely we see a pullback of worth here in the very near future. 

Chart: