Trading Plan for October 15, 2012

Pre-market update (updated 9am eastern):

• Europe is trading 0.9% higher. 
• Asian markets traded mixed/flat.
• US futures are moderately higher ahead of the opening bell. 

Economic reports due out (all times are eastern): Retail Sales (8:30am), Empire State Manufacturing Survey (8:30am), Business Inventories (10am)

Technical Outlook (SPX):

• We saw yet another day on Friday, where the market had gains it simply could not hold on to. 
• Ahead of the bell, shows the market gaping higher, but the gap-ups have resulted in difficult days for the market.
• SPX finished 2/10’s of a point above the 50-day moving average. So far it is holding but not by much.
• But far more important is the fact that we confirmed the double-top pattern on SPX and closed below critical support at 1430. 
• At this point, we should expect a near-term bounce, but expect it to be short-lived. 
• Ultimately, we need to start focusing more on short opportunities particular on a dead cat bounce that takes price close to key resistance levels on individual equities, and offering ideal risk/reward setups. 
• 8-day EMA is tracking nicely against the SPX offering a level of resistance over the past three trading sessions. 
• Since 10/5 the SPX on the 30-min chart shows a well-defined downtrend in place. 
• Also worth noting is SPX price on the daily is testing the lower Bollinger Band. With the exception of last summer, this typically offers an ideal bounce point for the market. Last time the lower BB was tested we saw an eight day move that took us from 1396 to 1473.
• We have broken the long-term trend-line off of the 6/4 lows. That is no doubt problematic for bulls. 
• No where in the selling are we really seeing panic. It’s more like a leaky faucet that continues to just drip…drip…drip…
• SPX closed right on the lower Bollinger band. 
• VIX spiked above 16 on Friday. 
• 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:

• Closed out AET for a 2.6% gain at 43.22 from $42.12.
• No new positions added to the portfolio. 
• Remain long LMCA at $107.00, GWW at $210.00, AAPL at $637.69, SHLD at $54.48, HAL at $34.17. 
• Remain short DRC at $52.38 and CPRT at 27.00
• Stop-loss tightened to $58.71 for SHLD.
• Stop-loss tightened to $212.75 for GWW.
• Track my portfolio RealTime here.

Charts: