Trading Plan for March 7, 2012

Economic Reports Due out (Times are EST): MBA Purchase Applications (7am), Challenger Job-Cut Report (7:30am), ADP Employment Report (8:15am), Productivity and Costs (8:30am), EIA Petroleum Status Report (10:30am), Consumer Credit (3pm)

Premarket Update (Updated 6:30am eastern):

• US Futures are bouncing this morning – up moderately. 
  
• Asian markets saw losses of about -0.7%.
  
• European markets are trading 0.3% higher. 
  

Technical Outlook (S&P):

• The S&P posted its largest loss of the year, and the first one in excess of 1% yesterday. 
• We sliced through the 20-day moving average and the trend-line off of the November lows. 
• Price settled near a short-term support level (shown in the chart below). 1340 represents a key support level. 
• Volume was slightly higher yesterday, and above recent averages. 
• A move of 8 points or more on the S&P would allow the SPY to start filling the gap from yesterday’s open. 
• After you break the aforementioned support levels, there are no other significant support levels nearby. Watch the support level off of the October lows which currently sits at 1327 and converges with the down trend off of the 2007 highs. 
• There was no evidence of any sustained or attempted dip buying yesterday – which is an absolute first for 2012. 
• 30-minute chart on the S&P has put in a lower-low. Wouldn’t be surprised to see a bounce at these levels. 
• S&P’s uptrend since November forms a bearish wedge that was confirmed yesterday. 

My Opinions:

• I’m stunned that we didn’t see any attempt to dip-buy this market but I don’t think it is a lost craft at this point, so I fully expect to see it come today in the form of a bounce or in any new attempt to push the market lower. 
• Should that not happen, I think you are suddenly looking at a complete change in market  mentality going forward. 
• After yesterday, there is no doubt that the bulls are moving up those stop losses on existing positions, to protect their existing gains. Trigger those stops in mass and things get very interesting. 
• For more than 10 years, the first two weeks of March have been horrible for the bulls – seeing strong sell-offs (with the exception being 2010 and the second week of 2009). Second half of the month has fared much better. It is an incredible phenomenon.
• I’m using January-February of last year as my roadmap for trading this market – price action is nearly identical, as is the time frames too. With that being said, it is likely we see a pullback of worth here in the very near future. 

Chart: