Trading Plan for March 16, 2012

Economic Reports Due out (Times are EST): Consumer Price Index (8:30am), Industrial Production (9:15am), Consumer Sentiment (9:55am)

Premarket Update (Updated 8:30am eastern):

• US Futures are looking at a slightly higher open.
  
• Asian markets had a mixed/flat day. 
  
• European markets are trading slightly positive
  

Technical Outlook (S&P):

• The S&P managed to extend its gains to new recovery highs and above the psychological 1400 price barrier. 
• Volume has actually picked up quite nicely over the last three days. 
• The Dow Jones is actually attempting to go up for the 8th straight day – a rare accomplishment. 
• The market is getting oversold in the very short-term. 
• Price action of late looks parabolic and wouldn’t be surprised to see a sell-off at this juncture. 
• Ideally the bulls would do itself some good if they could get the markets to consolidate for a week or two at or near its highs. 
• Price-level resistance can be found at 1428, and of course psychologically 1400 will be a test for the bulls as most milestone figures are. 
• Nearest support level for the S&P lies around 1378 – 

My Opinions:

• While everyone enjoys this kind of market action, in the bigger picture I’m fairly skeptical of the long-term sustainability of such a rally. 
• A lot of bulls getting pulled off of the sidelines, and a lot of people getting over confident (though none of them ever realize this) which is usually a time you want to be nervous about being too aggressive to the long-side. Keep trading with the trend, just be cautious. 
• Looking back at recent history, when we got these major breakout rallies to new highs, we’ve seen at least 1-2 weeks consolidation – which wouldn’t surprise me (wouldn’t surprise me either if we ripped to infinity and beyond at this point) considering how far removed we are from any significant support levels. 
• While I believe that this market is rising on pure government fluff and is ultimately unsustainable, trying to get in front of it to the short-side at this point is ill-advised. 
• Bearish arguments for a market pullback were annihilated Tuesday with the cosmic rally that took place. 
• The market tends to rally on strength in the Euro, but when the Euro is selling off, the market has ignored the action. 

Chart: