Trading Plan for October 22, 2012

Pre-market update (updated 9am eastern):

• Europe is trading mixed.
• Asian markets traded in a broad range from -0.7% up to +0.7%
• US futures are slightly higher ahead of the opening bell. 

Economic reports due out (all times are eastern): None

Technical Outlook (SPX):

• Triple top now forming on the SPX, as Friday saw a very hard sell-off. 
• Held the 50-day moving average, which last few times we have tested this price level, has resulted in a market bounce. 
• Friday’s sell-off practically wiped out all of the week’s gains. 
• Despite the sell-off, we still remain in a sideways channel, that has yet to provide  us with a signal to the up or down side. 
• Volume was notably higher on Friday, during the sell-off, though this could be attributed to options expiration as well. 
• A break below 1425 would be significant, as long as we close below that level. 
• To the upside, the bulls needs to break 1464
• Slight increases in the volume level over the last four days consecutively. 
• 30 minute chart looks extremely choppy, but mirror image of daily price action. 
• Multiple ways to look at this market… I’ll detail both perspectives
• 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.
• VIX spiked the most it has in a very long time – over 13% to above 17. 
• 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:

• Shorted CAKE at $33.97.
• Track my portfolio RealTime here.

Charts: