Trading Plan for October 11, 2012

Pre-market update (updated 9am eastern):

• Europe is trading +0.8% higher. 
• Asian markets traded mixed/flat.
• US futures are moderately higher ahead of the opening bell. 

Economic reports due out (all times are eastern): International Trade (8:30am), Jobless Claims (8:30am), Import and Export Prices (8:30am), EIA Natural Gas Report (10:30am), EIA Petroleum Status Report (11am)

Technical Outlook (SPX):

• The four days of gradual  intraday selling has been quite impressive in terms of consistency and steadiness. 
• No where in the selling are we really seeing panic. It’s more like a leaky faucet that continues to just drip…drip…drip…
• 1430 was tested yesterday and held as expected. That doesn’t mean though it won’t eventually break. Just held today. 
• SPX closed right on the lower bollinger band. Last time the lower BB was tested we saw an eight day move that took us from 1396 to 1473. 
• Over the past year, a re-test of the lower bollinger band has been a great opportunity to get long at. Beyond a year, you have last summer’s sell-off that paid no attention to the breach price made on the lower BB. 
• What is astounding is that over the past four days, volume has grown increasingly weak. Like what we saw this summer. 
• SPX is short-term oversold. 
• 50-day moving average is in play at 1425. 
• Double-top on the daily chart coming very close to fruition. 
• 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. 
• 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 PNR at $44.03 from 45.06 for a -2.3% loss. 
• Bought GWW at $210.00. 
• Bought LMCA at $107.00. 
• Shorted CPRT at 27.00
• Remain long AET at $42.12, AAPL at $637.69, 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: