Trading Plan for May 18, 2012

Economic Reports Due out (Times are EST): None

Premarket Update (Updated 7am eastern):

• US futures are moderately higher ahead of the open.
  
• European markets are trading mixed. 
  
• Asian markets were significantly lower – on average of -2.4%
  

Technical Outlook (S&P 500):

• Yesterday’s trading session was marked with perpetual selling throughout the day, and one of the most bearish sessions of the year-to-date. 
• Russell is the first index to test the 200-day moving average as it did yesterday. So far it has held. 
• Volatility is rapidly increasing – above 20 and at the highest levels since December of last year. 
• Facebook IPO comes out today and is one of the largest and most hyped IPO’s ever at $104B. How much it will impact the markets today, is hard to say, but will have a direct impact on the Nasdaq exchange for which it is listed on. 
• 10 out of the last 12 trading sessions on the S&P have finished lower, including five straight, and we are well oversold on both daily and weekly charts. 
• Minor support at 1301. Significant support in the 1294 area, followed by another key support level at 1275. 
• Volume continues to increase as the market pushes lower. 
• A bounce at these levels seems  likely. A strong bounce could take us as high as 1357. 
• Closing lows haven’t been seen since 1/17/12. 
• 30-minute chart shows a perfect downtrend in place. 
• S&P is 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:

• Careful trading the FB IPO today. It will likely be moving extremely fast, and very volatilie. Could also lead to a significant market bounce today as well. 
• I’m viewing this market with a sell the rip, cover the dip approach. 
• Covered WCRX at $20.15 from $20.82 for a 3.2% gain.
• Covered SAP at $59.88 from $62.31 for a 4% gain. 
• Shorted JCI at $30.73.
• Remain short SIAL at $70.27, VAR at $63.56 and ST at $30.37

Chart: