Trading Plan for October 4, 2012

Pre-market update (updated 4:30am eastern):

• Europe is trading 0.3% higher.
• Asian markets trading 0.7% higher. 
• US futures are trading moderately higher ahead of the bell.

Economic reports due out (all times are eastern): Challenger Job-Cut Report (7:30am), Jobless Claims (8:30am), Factory Orders (10am), EIA Natural Gas Report (10:30am), FOMC Minutes (2pm), Treasury STRIPS (3pm)

Technical Outlook (SPX):

• Wednesday gave us a fairly choppy market session…yet we still managed to finish respectably higher on the day. 
• On the daily chart SPX looks like we might be forming a bear-flag pattern, but then on the flip side, you could make a case for market strength – rising 4 out of the last 5 days. 
• We could see a 10-20-day moving average crossover to the downside. Last time we saw this was in early September, and it marked a short-term bottom and subsequently bounced and sent the market nearly 80 points higher. 
• The daily and the 30-minute chart are clearly agreeing on the fact that there is clear resistance at 1458-59. 
• Volume has been relatively average, maybe slightly below, but nothing unusual. 
• Closer to being overbought short-term than we are oversold. 
• 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 trading below 16.
• Beyond that there is some (very slight support) at 1428. More significant support lies at 1396 and 1412. 
• 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. 
• Upward trend-line off of the 6/4 lows has rising support at 1426
• 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
• If another sell-off were to ensue, watch for a break and close below 1396 for a new lower-low in the market.  

My Opinions & Trades:

• Covered my short position in INVN at $11.93 from $12.14 for a 1.7% gain. 
• Bought SHLD at $56.15. 
• Currently still long in VZ at $45.68, WYNN at $115.42, TTM at $25.50 and short ACTV at $12.17
• Track my portfolio RealTime here. 

Charts: