Trading Plan for March 20, 2012

Economic Reports Due out (Times are EST): ICSC-Goldman Store Sales (7:45am), Housing Starts (8:30am), Redbook (8:55am)

Premarket Update (Updated 8:30am eastern):

• US Futures are down moderately ahead of the open.
  
• Asian markets saw its trading range from +0.2% down to -1.1%.
  
• European markets are trading -1.3% lower
  

Technical Outlook (S&P):

• The weakness that we are seeing in the S&P ahead of the open, unless it piles on throughout the day, won’t do much to change the character of the market, or violate any key support levels. 
• Key support levels to watch today is the 10-day moving average at 1390ish, and the 20-day moving average at 1375ish –  I don’t expect either to be contested today. 
• Volume dropped below 5-day lows. 
• The market is stanchly in overbought territory in the short, mid and long-term time frames. 
• One major concern for equities is the % of stocks that continue to trade below its 40-day moving average and that continues to drop daily. 
• The S&P, even during this rally tends to come back down to the 10-day moving average and trade in line with the MA which at this point is 25 points above it – good reason to believe that it will contract back to that level in the short-term (i.e. 1380-1390)
• Price-level resistance can be found at 1428. 

My Opinions:

• Not that I don’t think this market needs to pullback like it is trying to do today, because I do, I just don’t have much confidence in the market being able to  keep the weakness in place, and fully expect the dip buyers at some point to put a nice rally in off of the lows.
• If you are short going into today, I would be somewhat trigger-happy going into today in taking profits. 
• This is one of the strangest markets that I’ve seen, because traditional indicators of market reversals or signs showing it being overheated are basically worthless right now. Euro dropping has been irrelevant, market negatives have been inconsequential. Much of the rally is in conjunction with favorable Fed policy that continues to allow for this eye-shattering rally. Which hasn’t that really been the case since March ’09?
• A lot of bulls getting pulled off of the sidelines, and a lot of people are becoming 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 get these major breakout rallies to new highs, we’ve seen at least 1-2 weeks consolidation – which wouldn’t surprise me considering how far removed we are from any significant support levels (wouldn’t surprise me either if we ripped to infinity and beyond at this point). 
• 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. 
• The market tends to rally on strength in the Euro, but when the Euro is selling off, the market has ignored the action. 

Chart: