Trading Plan for October 10, 2012

Pre-market update (updated 8:30am eastern):

• Europe is trading -0.2% lower.
• Asian markets traded in -1.5% lower. 
• US futures are flat ahead of the bell. 

Economic reports due out (all times are eastern): MBA Purchase Applications (7am), Wholesale Trade (10am), Beige Book (2pm), Treasury Budget (2pm)

Technical Outlook (SPX):

• Heavy sell-off yesterday that brings us very close to testing the rising uptrend-off of the 6/4 lows at 1434.
• Yesterday alone saw the SPX move below the 10-day and 20-day moving average. 
• Double-top on the daily chart coming very close to fruition. 
• Beyond 1434, the 1430 level on SPX remains key for the SPX – break that level and selling will very likely accelerate. 
• On the SPY, you basically have a bearish island reversal from 10/4-8 with the gaps on day 2 and day 3 in opposite directions and was confirmed by yesterday’s follow-through. 
• After Friday’s breakout failure and back below key resistance, it is important to recognize that the market is in a broader market consolidation range. Break of 1430 changes that though. 
• Another push above 1465, and ideally above 1474, would be bullish, and possibly lead to some squeezing of the bears. 
• This would also create a ‘higher-high’ for the market which would be extremely important and pave the way for a test of 1500. 
• Failure to make a new high in the near-term, would be indicative of a topping pattern in the broader market. 
• Taking a look at the weekly chart of SPX, the conditions look very healthy with no signs of a near-term breakdown. 
• For the bulls to build confidence among investors, there needs to be less of the intraday sell-offs. And the bears, if they really want this market to push lower, they need to take advantage of the intraday weakness it continues to get handed. 
• VIX is now trading above 16.
• Fed’s QE3 launch is going to add a lot of buying power to this market and drive more people out of interest-bearing assets and into equities in search of some kind of return. 
• One area of concern is the 3 large gaps off of the 6/4 lows that remain unfilled, including 6/6, 7/26, 8/3

My Opinions & Trades:

• Stopped out of WYNN at $111.75 from $115.42 for a -3.2% loss. 
• Bought AET at $42.12. 
• Remain long AAPL at $637.69, PNR at $45.06, VZ at $45.68, SHLD at $54.48. 
• Remain short DRC at $52.38
• Stop-loss tightened to $45.80 for VZ.
• Stop-loss tightened to $57.75 for SHLD.
• Track my portfolio RealTime here.

Charts: