Trading Plan June 19, 2012

Economic Reports Due out (Times are EST): FOMC Meeting Begins, ICSC-Goldman Store Sales (7:45am), Housing Starts (8:30am), Redbook (8:55am)

Pre-market Update (Updated 8:00am eastern):

• US futures are slightly higher.
• European markets are trading 0.5% higher. 
• Asian markets traded on average -0.4% lower.

Technical Outlook (SPX):

• Yesterday provided us with sideways price action, with a slight bullish tilt to it. 
  • 50-day moving average stopped any hopes of a rally – and will be key resistance for today.
• 1346 represents where the moving average will be at today, and where the S&P will need to break through. Today’s slight strength ahead of the bell could see an open above that price level. 
• We are right back in overbought territory, but the thing is, if the market is indeed on a strong run, it can stay in this area, for quite a while. 
• A healthy sign for the market is that we are just below the upper-band of the Bollinger Bands (not out side of it) and riding the upper band nicely higher now. 
• There is now an established uptrend in place on SPX off of the 6/4 lows with consecuitive higher-highs and higher-lows now (two of each). 
• FOMC Statement to be issued tomorrow, which could stir up  market rumors of QE3 (though I doubt it).
• Quite a ways from current price, but ultimately, if the price can clear 1401 we’ll have a market that is very bullish. 
  • Represents the slightly descending resistance level off of the 4/2/12 highs. 
• SPX confirmed the inverse head and shoulders pattern on Friday. 
• Of late, respectable support lies at the 10-day moving average. 
  • Has touched it multiple times in the past 2 weeks and held each time. 
• IH&S pattern very obvious on the 30-minute chart.
  • Confirmed on Friday.
• Volume remains relatively average. 
• The markets in general have pulled back roughly 10% off of its recent highs which is typically considered a “pullback” in the markets. 
  • Measured by recent highs to its most recent lows. 
• A break below 1306 would represent a resumption of the downward trend. 
• The VIX had one of its worst days in a long long time – dropping over 13% and pushing it back below 20 at 18.32. This is a very bullish sign for the market, as fear is starting to leave the markets. 

My Opinions & Trades:

• I don’t see, based on the charts, any notable reasons to be short this market. 
  • I can tell you a million economic/fundamental reasons, but as a chartist, I have to leave personal biases behind, and simplify read the charts. 
• With a total of 6 long positions, I may look to push it to 7, but more than likely I would look to switch out non-performers with new ones I believe hold more opportunity to them. 
• Careful about trading in and out of this market too much – I’m playing with my original stop-losses which is usually 3-4% off of the entry price and gives me enough wiggle room to weather the choppiness of this market day-to-day. 
• Bought AMZN at $221.60.
• Bought BXS at $13.71.
• I am still long PPL at $27.65, PCYC at $40.66, WNR at $20.51, VCI at $19.41

Charts: