Trading Plan for May 8, 2012

Economic Reports Due out (Times are EST): NFIB Small Business Optimism Index (7:30am), ICSC-Goldman Store Sales (7:45am), Redbook (8:55am)

Premarket Update (Updated 8:00am eastern):

• US futures are moderately lower ahead of the open. 
  
• Asian markets, on average, finished higher by about 0.3%. 
  
• European markets are trading in a flat/mixed fashion. 
  

Technical Outlook (S&P):

• S&P made a fine recovery to finish in positive territory, after overnight futures were printing readings of more than 17 points down. 
• Most importantly, the S&P managed to hold the rising support level at 1368. 
• In the short-term, the market is well overbought. We tend to get bounces in the market rather quickly in this area.
• Triangle pattern has formed on the S&P with a series of higher-lows a and lower-highs.
• The S&P experienced an increased amount of selling Friday, and is back inside of the 1392/1357 price range, which muddles the market outlooks some. Possibility of the market breaking through the lower channel today. 
• There is a short-term slight uptrend in place off of the 3/6 lows with support today at 1368. 
• The S&P is now trading below the 10-day, 20-day and 50-day moving averages.
• 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:

• While I have abandoned any bullish expectations for this market, the recent move to the downside happened so suddenly and swiftly, that the possibilities of getting short this market in a heavy way is dangerous as it is very possible the shorts may get squeezed here soon. 
• Sold DF at $12.34 from $12.43 for a -0.7% loss. 
• Bought LULU at $77.70, BZH at $2.70
• Shorted VRX at $52.19
• Still shorted VAR at $64.69
• Remain long HBAN at $6.66 

Chart:

See last nights market recap video.