Trading Plan for May 15, 2012

Economic Reports Due out (Times are EST): ICSC-Goldman Store Sales (7:45am), Consumer Price Index (8:30am), Retail Sales (8:30am), Empire State Manufacturing Survey (8:30am), Redbook (8:55am), Treasury International Capital (9am), Business Inventories (10am), Housing Market Index (10am)

Premarket Update (Updated 7:00am eastern):

• US futures are moderately higher at the open. 
  
• Asian markets traded mixed from -1.2% up to +0.8%
  
• European markets are trading slightly higher. 
  

Technical Outlook (S&P 500):

• S&P crossed a very important price level yesterday by closing below 1340 at 1338. 
• Price action is now below the previous two higher-lows. 
• Closing lows haven’t been seen since 2/2/12. 
• Intraday, there was  a willingness by the market to buy the dip, but that was quickly crushed in afternoon trading. 
• 30-minute chart shows that the bear flag pattern was confirmed, as well as the one in the 5-minute chart. 
• Now that we’ve broken 1340 price support level, there are few support levels until you reach 1294 area. 
• We are slightly off of oversold levels at this point. 
• Confirmed the double-top pattern on the S&P daily. 
• S&P is now trading below the 10-day, 20-day and 50-day moving averages.
• On the weekly chart, we confirmed the bearish wedge pattern that we had been following for weeks. Very bearish development for the market. 

My Opinions & Trades:

• We are due for some kind of bounce in this market, but if it is anything like the previous bounce, it will be short lived. I don’t expect to put a lot of optimisim in today’s early morning strength. 
• I’m viewing this market with a sell the rip, cover the dip approach. 
• Covered UPL at $19.75 from $20.93 for a 5.6% gain yesterday. 
• Sold USO at $35.80 from $36.74 for a $2.5% loss. 
• Added two new short positions: SAP at $62.31 and $SIAL at $70.27
• Remain long AAPL at $571.44

Chart: