Trading Plan for October 19, 2012

Pre-market update (updated 9am eastern):

• Europe is trading -0.5% lower. 
• Asian markets traded 0.2% higher. 
• US futures are slightly lower ahead of the opening bell. 

Economic reports due out (all times are eastern): Existing Home Sales (10am)

Technical Outlook (SPX):

• Yesterday saw the S&P head fake a breakout. Now price remains below the price channel and resistance. 
• We remain overbought short-term in this market. 
• A close above 1462 on the SPX would result in a breakout of the bull flag pattern that has been forming off of the 9/14 closing price. 
• Slight increases in the volume level over the last three days consecutively. 
• 30 minute chart looks extremely choppy, but mirror image of daily price action. 
• So despite the Monday-Wednesday rally, we have yet to see any technical improvement on the chart. Therefore its best, at this point, to be considered a dead-cat bounce until proven otherwise. 
• Multiple ways to look at this market… I’ll detail both perspectives
• Technically, we are in a downtrend. Since September highs, we have 1) formed a slightly lower-high 2) formed a subsequent lower-low 
  • This creates a SLIGHT downtrend, but the channel is barely trending lower. 
• On the other hand, considering the larger uptrend that we were in from the 6/4 lows, one could consider this to be a developing bull-flag before moving higher. 
• I’d recommend not drawing a conclusion on either scenario – let the market do that eventually.
• We confirmed the double-top pattern on SPX and closed below critical support at 1430 last Friday. 
• VIX is at 15.  
• 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:

• Day-Traded FB for a 0.58% loss from $19.07 to $18.96
• Shorted EXPD at $35.65.
• Remain long AAPL at $637.69, MCD at $94.00.
  
• Remain short CPRT at 27.00
• Track my portfolio RealTime here.

Charts: