Trading Plan for May 30, 2012

Economic Reports Due out (Times are EST): MBA Purchase Applications (7am), ICSC-Goldman Store Sales (7:45am), Redbook (8:55am), Pending Home Sales Index (10am)

Premarket Update (Updated 8:30am eastern):

• US futures are moderately lower ahead of the opening bell.
  
• European markets are trading close to 1% lower. 
  
• Asian markets saw negative returns between -0.3% down to -1.9%. 
  

Technical Outlook (S&P 500):

• S&P made a strong move yesterday, in breakout form, heading straight for resistance at 1340. 
• Closing in on a test of the 20-day moving average. Price managed to finish above the 10-day moving average yesterday for the first time since 5/2/12.
• S&P is now short-term overbought. 
• 30-minute chart looks choppy, but nonetheless, there is a series of higher-highs and higher-lows. 
• Volume has dropped off considerably over the past two days, and to a lesser extent since this market has bounced off recent lows. 
• Nearest level of resistance for the S&P is at 1340 and then again at  1357. 
• 1294-5 becomes the key support level for the bears to push below. After that we have a support area at 1275. 
• VIX is still elevated and rests above 20
• S&P is trading below the 20-day and 50-day moving averages.

My Opinions & Trades:

• We are gapping down this morning, which tends to be problematic for the bears to hold throughout the session. 
• Expect continued choppiness in the market. 
• I think it will be hard for the market to get past the 1340 mark on the S&P . We are reaching that level, where I think the market is becoming ideal for reloading on the short positions. 
• Covered JCI yesterday at $31.07 from $30.29 for a -2.6% loss. 
• Added KWK long yesterday at $4.60
• Using the long position to hedge my exposure short, but remain net-short still. 
• Remain short CPWR at $9.03, WCRX at $20.15, ATVI at $12.14.