Trading Plan for May 2, 2012

Economic Reports Due out (Times are EST): MBA Purchase Applications (7am), ADP Employment Report (8:15am), Treasury Refunding Announcement (9am), Factory Orders (10am), EIA Petroleum Status Report (10:30am)

Premarket Update (Updated 8:00am eastern):

• US futures are slightly lower ahead of the open.  
  
• Asian markets traded 0.6% higher. 
  
• European markets are trading in a mixed/flat manner. 
  

Technical Outlook (S&P):

• S&P rallied yesterday but gave up more than half of its gains in a perpetual afternoon sell-off into the close. 
• As stated in yesterday’s trading plan, the first month of the month typically brings in strong days to the upside.
• 10-day moving average crossed back above the 20, and 50-day moving averages.
• 1392 continues to represent support for the recent breakout. Break that price level, and conditions could start getting bearish again. 
• S&P is well overbought at the juncture, and a few more days of consolidation would be a good thing for the market. 
• 30-minute chart shows a healthy double bottom in place in the S&P and solid trend-line off of the 4/23 lows. 
• The market’s whip-saw action of late has created a convergence of moving averages (10, 20 & 50 DMA’s). 
• Not until we jet back and above 1422 will this market have resumed the rally back off of the October lows. Despite leaning bullish towards this market now, there still remains the possibility of the market forming a lower-high between current price and 1422. 
• Friday’s continuation rally changed the character of the market to bullish by breaking out of the range the S&P had been trading in. 
• Now the bulls need to make sure that any weakness that may come their way doesn’t cause them to fall back below 1392. 
• The previous trend-line off of the October lows has become resistance for price action on the underside. 
• 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:

• I remain bullish in the short-term after witnessing the market breaking out of the 1392/1357 range last week. 
• Sold GCA yesterday at $8.41 from $8.51 for a -1.2% loss. Sold CLX at $70.36 from $70.19 for a 0.2% gain. 
• Shorted KCG at $13.39 and $AXS at $34.16 yesterday. 
• Went long EMAN at $55.00 and JPM at $44.08.
• Remain long HBAN at $6.66.

Chart: