Trading Plan for March 29, 2012

Economic Reports Due out (Times are EST): GDP (8:30am), Jobless Claims (8:30am), Corporate Profits (8:30am), Bloomberg Consumer Comfort Index (9:45am), EIA Natural Gas Report (10:30am), Kansas City Fed Manufacturing Index (11am), Bernanke Speaks (12:45am), Farm Prices (3pm)

Premarket Update (Updated 8:30am eastern):

• US Futures are moderately down ahead of the open. 
  
• Asian markets were down about -1%. 
  
• European markets are seeing losses of about -1.1%
  

Technical Outlook (S&P):

• Surprising sell-off yesterday, that recovered over half of its losses by the end of day. The S&P also managed to close a shade above its 10-day moving average, after trading below it for much of the session. 
• 1386 is a key price/trend-line to watch off of the December lows. If we break that price level, I believe there is a good chance we test the 50-day moving average at around 1360. 
• Watch the previous lower-low also at 1386 as a break and close below that level would represent the first lower-low on the daily charts since the rally began back in November. 
• Volume picked up some and was higher than anything we’ve seen over the last two weeks. 
• One thing that is very concerning to me is the fact that we have about 3 gaps, dating back to 3/6 that have yet to be filled by the markets. Yesterday we filled the 3/27 gap perfectly before bouncing. 
• 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’m fairly surprised by the amount of selling that we’ve seen so far this week. However, at this point the selling does not look ‘panicky’ and has a sense of orderliness about it. 
• If this market breaks the lows from 3/27, it would be a strong indication that this market is losing its ability to climb higher in the short-term.
• If the bears want to see this market roll over, then the kind of afternoon rally that we saw yesterday needs to cease, otherwise it is all just a “buy-the-dip” opportunity. 
• 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: