Pre-market update (updated 12:00am eastern):

  • Asian markets are trading mixed with slight bullish bias. . 
  • US futures are trading moderately higher ahead of the bell.

Economic reports due out (all times are eastern): Durable Goods Orders (8:30am), GDP (8:30am), Jobless Claims (8:30am), Corporate Profits (8:30am), Pending Home Sales (10am), EIA Natural Gas Index (10:30am), Kansas Fed Manufacturing Index (11am), Farm Prices (3pm). 

Technical Outlook (SPX):

  • Today is setting up for the bounce with strength in overnight futures that we are getting. 
  • Main question here is whether the bounce is nothing more than a dead-cat bounce or a legitimate end to the pullback and onward to higher prices. I tend to believe ultimate it will be the latter of the two. 
  • Prior to this two-day pullback, one note that I had previously made was the significant distance from a  previous higher-low, and how the market is getting overextended when considering current price vs the lows of the previous higher low. Previous higher lows had occurred about 30-40 points from each other. This was one more than 70 points from the previous higher low. With that said the pullback was needed. 
  • We broke through the 20-day moving average which I found surprisingly – without a fight. 
  • In the short-term the market is oversold – something that hasn’t happened much these days – in fact it hasn’t happened since mid-July. 
  • It is looking more and more to me that we could see us test the upward channel we have been on since the June 4th lows. At that point I’d expect that the market would bounce. If it happened tomorrow, that upward trend-line would be at 1419. 
  • Also worth noting is that we’ve finished lower seven  out of the last eight days (and five days straight). Prime conditions for a bounce. Don’t be caught in a a predictable market squeeze. 
  • Volume has remained elevated over the past two days in comparison to previous weeks. 
  • Despite being 41 points off of the highs in the last two weeks, we are still seeing a VIX that is below 17. Hardly the level of fear most bears would like to be seeing here. 
  • Best way to use moving averages should be as sentiment indicators and not a “line-in-the-sand” type of approach. 
  • 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. 
  • Going back years, there really is little in the way of resistance for the markets until it tests 1500.
  • Upward trend-line off of the 6/4 lows has rising support at 1419. 
  • SharePlanner Reversal Indicator confirmed the move higher this past week. 
  • 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:

  • Yesterday’s sell-off took us out of 5 positions 2 profitable 3 for losses: 
  • Sold ALXN at $112.50 from $102.53 for a 9.7% gain. 
  • Sold PNR at $42.50 from $43.85 for a -3.1% loss. 
  • Current stop-losses have been adjusted across the board. 
  • Stop-Loss for WYNN increased to $113.50.
  • Remain long WYNN at $107.47
  • Track my portfolio RealTime here. 


SP 500 Market Analysis 9-27-12