Trading Plan for March 26, 2012

Economic Reports Due out (Times are EST): Bernanke speaks (8am), Chicago Fed National Activity Index (8:30am), Pending Home Sales Index (10am), Dallas Fed Manufacturing Survey (10:30am). 

Premarket Update (Updated 8:30am eastern):

• US Futures are mixed/flat ahead of the open. 
  
• Asian markets traded in a mixed/flat manner. 
  
• European markets are trading +0.7% higher.
  

Technical Outlook (S&P):

• Friday’s rally off of the intra-day lows and into positive territory, was a great forecast of a potential bounce this week. 
• Assuming the market strength holds today, look for us to move forward with making new highs in this rally. If we fail to do so, or experience a dramatic sell-off after nearing the highs that would be a very bearish gesture for the market going forward. 
• Bulls need to be consumed with breaking and closing above 1414. 
• The bulls are poised to break and recapture the 10-day moving average. I mentioned last week, that recent breaks of the 10-day MA has led to dramatic bounces, and it is doing so once again. 
• Volume remains a shade below recent averages. 
• The 30-minute chart shows that the we have a double bottom in place. It is key, in early morning action for the bears to push the market below yesterday’s lows. 
• Bearish wedge pattern forming in the intermediate term has yet to confirm, but looks ominous. 
• 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. 
• Price-level resistance can also be found at 1428. 

My Opinions:

• The best outcome for the bears today would be if they could reverse today’s action and close below Friday’s lows. That would create an instant air of bearishness.
• I don’t believe the bulls will give up today’s gains. In fact I’d expect a descent rally today of somewhere around 1%. 
• Watch the first hour of trading and price action – it is usually very telling whether this is going to be another dip-buy opportunity. 
• 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. 

Chart: