Trading Plan for Jan 4, 2011

Current Long Positions (stop-losses in parentheses): OI (29.94), EMN (81.47), APOL (38.22), BTU (61.85), NVDA (15.49), BZ (7.83), GS (166.30), BCSI (29.37)

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

BIAS: 28% Long

Economic Reports Due Out (Times are EST): ICSC-Goldman Store Sales (7:45am), Redbook (8:55am), Factory Orders (10am), FOMC Minutes (2pm).

My Observations and What to Expect:

• Futures are showing some slight follow-through on yesterday’s price action. 
• Asian and European markets, once again, saw a lot of strength. 
• S&P did a great job, despite some afternoon weakness, of keeping most of its gains, and more importantly breaking out and staying above recent market consolidation. 
• Not much in the way of near-term resistance, but dating back to 2008, the market could see some resistance between 1271 and 1276. 
• One thing that I would be very careful of is the similarities between this rally, and the rally from 11/4 and the selling that occurred thereafter. If we are heading in that direction, you need to be careful about getting too heavily long in your portfolio at this point. 
• Yesterday’s rally was right off of the 10-day moving average. 
• Volume finally reappeared as the S&P saw an above average amount.
• 9/1 and 12/1 rallies saw descent follow-follow through in price action the following day. 
• 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).
• I am growing more concerned by the recent trading relationships between dollar, gold and equities. A divergence worth keeping an eye on. 
• Any break below recent consolidation (1250 or less on the S&P) would represent a lower-low in this market. 
• For the bears – Not much in terms of near-term price resistance to lean on, so the bears need to begin halting further upward movement, and start a pullback that will create a future price barrier for equities. 
• For the bulls – hold the gains from yesterday, and provide some follow through over the next 1-2 sessions, that will lead the bears to further cover their positions. 

Here Are The Actions I Will Be Taking:

• I am a bit cautious about getting to heavily long. Another rally today and into tomorrow, will be a good reason to begin aggressively taking profits off the table. 
• BZ rallied well yesterday, and will live to fight another day. I do have my eye on BCSI, should it fail to recapture its breakout level today. 
• GS and NVDA responded well to the market strength yesterday and when weakness kicked in at the end, it maintained its gains on the day. 
• Closed out positions in BTU (+1.4%), APOL (2%), OI (0.4%), and EMN (2.7%), mainly due to the lack of action (OI & EMN) and inability to maintain the bulk of the day’s gains (BTU and APOL).
• NVDA continues to show a lot of strength, but I am becoming a little bit nervous over whether it may at this point be overextended. 
• Added GS at 171.62 and BCSI at 30.65 yesterday.
• Follow me in the SharePlanner Chat-Room today for all my live trades and ideas.