Trading Plan for May 31, 2012

Economic Reports Due out (Times are EST): Employment Situation (8:30am), Personal Income and Outlays (8:30am), PMI Manufacturing Index (9am), ISM Manufacturing Index (10am), Construction Spending (10am)

Premarket Update (Updated 8:30am eastern):

• US futures are flat and off their overnight highs prior to the open.
  
• European markets are trading -2.0% lower. . 
  
• Asian markets traded on average -0.7% lower. 
  

Technical Outlook (SPX):

• We saw the SPX recover from most of its losses yesterday to close a shade below breakeven. 
• Huge miss on employment number has us down near 2% at the open today, and a confirmed breakout of the bear-flag pattern that had been developing. 
• S&P is poised to test the 200-day moving average today at the open, which we haven’t been below since December of last year. 
• Large gap downs, such as what we are seeing this morning, have a difficulty of holding  at their intraday-lows and often times will bounce creating a short-squeeze effect. 
• We came off of overbought levels yesterday, and are beginning to see a steady increase in trading off of recent low-level volume. 
• We are breaking below the lows (1291) from last month as well. 
• The SPY chart shows a well defined bearish island reversal over this past week, that does a great job in predicting new downturns. 
• 30-minute chart has a newly formed double top in place. 
• Nearest level of resistance for the S&P is at 1334 and 1340 and then again at  1357. 
• Watch for additional support at 1275.
• VIX is still elevated and rests above 24
• S&P is trading below the 10-day, 20-day and 50-day moving averages.

My Opinions & Trades:

• Careful with adding new positions to the market today on both sides. 
• Likely to cover my short positions on such a huge move early on. 
• Covered WCRX at $19.02 from $20.15 for a 5.6% gain. 
• Covered CPWR at $9.00 from $9.03 for a 0.3% gain. 
• Shorted KMI yesterday at $33.38.
• Remain short CNH at $39.85 and KMX at $28.13.