Trading Plan for May 21, 2012

Economic Reports Due out (Times are EST): Chicago Fed National Activity Index (8:30am)

Premarket Update (Updated 8am eastern):

  • US futures are moderately higher ahead of the open.
  • European markets are trading about +0.7% higher.
  • Asian markets were mixed/flat.

Technical Outlook (S&P 500):

The breakdown in the market continued on Friday, finishing down yet again on strong volume. We closed right on the 1294-1296 support area that I had mentioned in previous posts as being a significant support area. It would make sense to me that we would see a bounce today off of this support level. Most significant breakdown was in the Russell Index which closed below the 200-day moving average. Volatility is rapidly increasing - above 25 and at the highest levels since December of last year. 11 out of the last 13 trading sessions on the S&P have finished lower, including five straight, and we are well oversold on both daily and weekly charts. Oversold bounce is nearly a given at these levels. In August - October's Sell off last year, we never saw a sell off of more than seven straight days. We are currently on six straight days. A strong bounce could take us as high as 1357. Next major support level, should we break below 1294 would be 1275. Volume continues to increase as the market pushes lower. Closing lows haven't been seen since 1/17/12. 30-minute chart shows a perfect downtrend in place but extremely oversold. S&P is trading below the 10-day, 20-day and 50-day moving averages.

My Opinions & Trades:





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