Trading Plan for October 9, 2012

Pre-market update (updated 8:30am eastern):

• Europe is trading mixed/flat.
• Asian markets traded in mixed fashion, ranging from -1.3% up to +0.5%. 
• US futures are slightly higher ahead of the bell. 

Economic reports due out (all times are eastern): ICSC-Goldman Store Sales (7:45am), Redbook (8:55am)

Technical Outlook (SPX):

• Low volume day, due to Columbus Day holiday kept the market uneventful… but lower nonetheless. 
• On the SPY, you basically have a bearish island reversal over the last three days, with the gaps on day 2 and day 3 in opposite directions. 
  
• SPX continues to ride the 20-day moving average higher. Let’s see if it holds yet again today. 
• 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. 
• There is an obvious double top pattern forming on the S&P. Below 1430 would confirm the pattern and represent a market breakdown. 
• If we a pullback, 1430 would mark critical support as it represents the uptrend that we’ve been on since the 6/4 lows. 
• While the 20-day moving average has been violated on a number of occasions, price action doesn’t tend to drop that far below it before popping back higher again. 
• 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. 
• Quickly approaching overbought conditions in the short-term, but not quite there yet. 
• Failure to make a new higher in the near-term, would be indicative of a topping pattern in the broader market. 
• 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 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:

• Closed out TTM at $25.90 from $25.50 for a 1.6% gain. 
• Bought Apple (AAPL) at $637.69. 
• Bought PNR at $45.06. 
• Remain long $WYNN at $115.42, 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 $56.45 for SHLD.
• Track my portfolio RealTime here.

Charts: