Trading Plan for March 30, 2012

Economic Reports Due out (Times are EST): Personal Income and Outlays (8:30am), Chicago PMI (9:45am), Consumer Sentiment (9:55)

Premarket Update (Updated 8:30am eastern):

• US Futures are moderately higher ahead of the open. 
  
• Asian markets were down about -0.3%.
  
• European markets are seeing gains of about 0.9%.
  

Technical Outlook (S&P):

• Yesterday gave us another hard sell-off in the early morning followed by a period of consolidation at those lows, and then finally a rally throughout the afternoon. In this case the S&P erased nearly -1% in losses. 
• S&P however did close below the 10-day moving average and bounced off of the intermediate-term trend-line off of the December lows. 
• Volume has actually  increased, ever so slightly, over the last two days. 
• 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. 
• 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:

• Should the S&P rally back to and break previous highs, the market will look strong going into next week technically. However, if for some reason it could break below the 3/23 lows, the tone and outlook of the market would change dramatically.
• 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 the buyers continue to buy each dip.
• 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. 
• 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.