Trading Plan for March 27, 2012

Economic Reports Due out (Times are EST): ICSC-Goldman Store Sales (7:45am), Redbook (8:55am), S&P Case-Shiller HPI (9am), Consumer Confidence (10am), Richmond Fed Manufacturing Index (10am), State Street Investor Confidence Index (10am), Bernanke Speaks (12:45am)

Premarket Update (Updated 8:30am eastern):

• US Futures are mixed/flat ahead of the open. 
  
• Asian markets soared higher – over 2%
  
• European markets are seeing a trading range between -0.1% and +0.5%
  

Technical Outlook (S&P):

• Very bullish day for the market yesterday, breaking out to new post-recovery highs. 
• One thing that is very concerning to me is the fact that we have about 4 gaps, dating back to 3/6 that have yet to be filled by the markets. 
• The 10-day moving average that was broken last week, was recaptured yesterday. 
• Watch for how long this new bounce off of previous lows lasts – if it is shorter in terms of time and price than the one that took place from 3/7-3/19, it could be an indication this market is losing its ability to climb higher in the short-term. 
• Volume was about as high as any reading that we’ve seen since 3/16 – but still nothing spectacular. 
• 30-minute chart looks healthy, putting in higher-highs and higher 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. 
• The next price-level resistance can be found at 1428. 

My Opinions:

• I’d expect for today to be fairly dull compared to yesterday, and if the bulls  can simply consolidate the market near the highs, they should consider it a success. 
• I’m not sure what we could possibly see from the bears as everything seems extremely unlikely against the tide of market bullishness. Ideally, they should try to get SPY into its gap area from yesterday which would be below 140.59. 
• 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: