Trading Plan for May 4, 2012

Economic Reports Due out (Times are EST): Employment Situation (8:30am), Treasury STRIPS (3pm)

Premarket Update (Updated 8:00am eastern):

• US futures are flat ahead of the open.  
  
• Asian markets traded in a wide range from -0.8% up to +0.4%
  
• European markets are trading 0.4% lower.
  

Technical Outlook (S&P):

• The S&P experienced an increased amount of selling yesterday, and dropped back inside of the 1392/1357 price range, which muddles the market outlooks some. 
• Don’t discount the potential for the market putting in a lower high here and continuing the downtrend that started on 4/2, particularly if the market sells off hard today on the employment number. 
• There is a short-term slight uptrend in place off of the 3/6 lows with support today at 1368. 
• The S&P found some support yesterday off of the 10-day moving average by closing just a shade above it. 
• We are well off of overbought levels now. 
• There was some signs of dip buying yesterday, but it was weak and eventually sold off. 
• 10-day moving average crossed back above the 20, and 50-day moving averages.
• 30-minute chart shows a confirmed head and shoulders pattern in place (see below). 
• The market’s whip-saw action of late has created a convergence of moving averages (10, 20 & 50 DMA’s). 
• 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:

• Now that we are no longer above 1392/1357, I have tempered any bullish expectations and am neutral on this market, till we receive further guidance. 
• Shorted VAR yesterday at $64.69
• Sold AVP yesterday at $22.30 from $19.97 for a gain of 11.7%. 
• Sold EMN at $53.38 from $55.00 for a 2.9% loss. 
• Still shorted KCG at $13.39 and $AXS at $34.16. 
• Remain long RHT at $61.17, HBAN at $6.66 and JPM at $44.08.

Chart: