Two weeks in the books for 2012 and two weeks of solid gains for the markets. While there hasn't really been a "good reason" to rally, markets have continued chugging higher.
Domestic and foreign economic data has been printing between "okay" and "not that great". This so-so econ data was followed up Friday with rumors, and then confirmation after the close, of credit downgrades across Euro-land. Rumors were flying during Friday's trading about France being downgraded and after the bell, S&P released additional downgrades across the Euro nations beyond just France.
Markets have continued to grind higher since opening 2012 but appear to be losing steam and rolling over. Daily trading ranges have fallen sharply (less volatility) and the VIX has a 20 handle. Volume has been extremely thin as well. The S&P is forming a double top under 1300.
The market is [still] reflecting overbought and MLK week / Jan options expiration week are statistically negative for the markets. I feel like the upside is limited here but that doesn't mean there couldn't be one last small push. My analysis reflects the upside is limited for the S&P to between 1300-1310 (+10 points, or +0.8%, from Friday's close).
The healthiest thing for the market would be to consolidate and pullback to test previous resistance turned support. For the S&P this would be the 1260-1265 area; the location of the 200 and 20 DMA's and solid chart support. A pullback to that level would set the market up for a nice bounce back up to the 1300-1310 level and give it the foundation it needs for a rally through the end of the month/quarter.
Earnings will continue this week and will tech and financials will be center-stage. JP Morgan (JPM) gave us a preview Friday with okay earnings but a dismal outlook. JPM is the best financial out there and if they aren't hitting on all 8 cylinders then the rest are barely idling. Tech could potentially be hindered by supply issues out of Japan as a result of the tsunami and lower than expected holiday sales.
Navigate wisely and stay profitable, my friends. Happy trading!
BOOKINGALPHA UPDATE:
Monthly Trading Service Commentary:
I took advantage of the continued grind higher by markets this week to open 2 new positions: Bear Call Spreads on QQQ and RUT.
Both positions, as well as the existing SPX Bear Call Spread deployed the previous week, remain comfortably OTM (Out of The Money). Confidence is high for these spreads for a successful and profitable expiration for the upcoming OpEx week. No more Jan expiration trades will be issued as I will be moving on to Feb trades now.
The Monthly Trading portfolio is currently 60% invested. The remaining 40% of the portfolio remains in cash.
The Monthly Advisory continues to outperform and deliver consistent drama-free Alpha:
+72.33% 2011 BookingAlpha Monthly Advisory
vs.
-0.01% 2011 S&P 500
No 2012 trades closed yet
See
Trading Record
Weekly Trading Service Commentary:
I took advantage of Tuesday's rally to execute a RUT Bear Call Spread comfortably above the market. While the market cointinued to grind higher as the week progressed, the RUT never threatened the Bear Call Spread which ultimately expired worhtless for maximum profit of +7.43% in 4 days.
The expiration of the RUT position brings the Weekly Trading portfolio back to 100% cash.
The Weekly Advisory continues to outperform and deliver Alpha:
+5.30% YTD BookingAlpha Weekly Advisory
vs.
+2.48% YTD S&P 500
See
Trading Record
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