Trading Plan for Jan 3, 2011

Current Long Positions (stop-losses in parentheses): OI (29.94), EMN (81.47), APOL (38.22), BTU (61.85), NVDA (14.78), BZ (7.75)

Current Short Positions (stop-losses in parentheses): None

BIAS: 42% Long

Economic Reports Due Out (Times are EST): ISM Manufacturing Index (10am), Construction Spending (10am)

My Observations and What to Expect:

• Futures are up strong to start the new year. 
• Asian and European markets on the whole, were/are up well over 1% in trading.
• The market is setting up to gap will above the 6-day consolidation levels, initiating a new leg higher in this market. 
• First day of the trading month has seen some very strong gains recently, well in excess of 1% (8/2, 9/1 and 12/1 – as noted in Friday’s trading plan). Today is setting up to do the same based on pre-market trading. 
• Volume should get back on track after two weeks of seasonal low volume. 
• Breakouts after extended periods of consolidation, are some of the best market conditions for trading, particularly in this case, where the consolidation has been very tight and at/near the highs. 
• Recent consolidation has allowed for the S&P upward trend-line to flatten out some which was healthy for the sustainability of the trend itself (steeper trend-lines can often lead to much quicker and sudden corrections). 
• With the likely breakout of consolidation that we are likely looking at, 1251 becomes the level, I believe, the bulls must hold to sustain the short-term bullishness of this market. 
• The relationship between equities, dollar and commodities of late, has not seen the same trading correlation. Definitely something to keep an eye on. 
• The lows from 12/15 and 12/16 represent, in my opinion, the “higher-lows” in this recent market rally, and a break below them at 1232, would significantly stall this market’s upward progression and potentially invite a new trend to the downside. 
• Depending on market action over the course of the next couple of days, the next “higher-lows” could change to recent market consolidation.
• For the bears – Sell the open, and erase early morning weakness. Not only will this lead to a false breakout, but will demoralize the bulls in starting the new year. 
• For the bulls – At the very least, avoid filling the gap. It will be considered a success, if the bulls can finish above the day’s opening price. 

Here Are The Actions I Will Be Taking:

• I am fairly content with the number of swing trades in the portfolio right now, but may very well look to day-trade a couple of breakout plays today. 
• Should the market rally today, and BZ fail to breakout (did on Friday, but then pulled back some at the close), I will close out the position. 
• APOL recovered well in the afternoon, which allowed me to keep it around today. 
• NVDA has the most potential of all the trades in my portfolio. 
• Will look to tighten the stop in OI at some point today. 
• Added NVDA at 15.28 and BZ at 7.96.
• Did not close out any positions on Friday. 
• Follow me in the SharePlanner Chat-Room today for all my live trades and ideas.