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:
