Trading Plan for May 16, 2012

Economic Reports Due out (Times are EST): MBA Purchase Applications (7am), Housing Starts (8:30am), Industrial Production (9:15am), EIA Petroleum Status Report (10:30am), FOMC Minutes (2pm)

Premarket Update (Updated 8:30am eastern):

• US futures are moderately higher at the open. 
  
• European markets are trading mixed/flat.
  
• Asian markets were down hard, ranging from -1.1% all the way down to -3.2%. 
  

Technical Outlook (S&P 500):

• Despite a respectable bounce in the early going, the S&P and market in general, managed to give up all of its day’s gains and finish decisively in the red. 
• Eight out of the last ten trading sessions have finished lower, and we are now firmly back in oversold territory short-term. 
• To say this market is due for a bounce is quite the understatement. 
• Price action is now below the previous two higher-lows. 
• Closing lows haven’t been seen since 2/2/12. 
• 30-minute chart shows a very strong downtrend in place with consecutive lower-highs and lower-lows. 
• Now that we’ve broken 1340 price support level, there are few support levels until you reach 1294 area. 
• Confirmed the double-top pattern on the S&P daily. 
• S&P is now trading below the 10-day, 20-day and 50-day moving averages.
• On the weekly chart, we confirmed the bearish wedge pattern that we had been following for weeks. Very bearish development for the market. 

My Opinions & Trades:

• We are due for some kind of bounce in this market, but if it is anything like the previous bounce, it will be short lived. I don’t expect to put a lot of optimism in today’s early morning strength. 
• I’m viewing this market with a sell the rip, cover the dip approach. 
• Sold AAPL at $554.09 from $571.44 for a -3% loss. 
• Bought DF at $14.75
• Shorted WCRX at $20.82
• Shorted ST at $30.37
• Remain short SAP at $62.31 and SIAL at $70.27

Chart: