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Rally Could Continue Into the New Year

Current market action looks similar to the two-month rally that began in September


Current Long Positions (stop losses in parentheses): PH ($78.95), HK ($18.56), VMW ($82.30), RRC ($41.65), NVLS ($30.05)

Current Short Positions (stop losses in parentheses): DTV (41.29), V ($77.61)

Bias: 24% long

Economic Reports Due Out (times are EST): Employment Situation (8:30 a.m.), Factory Orders (10 a.m.), ISM Non-Manufacturing Index (10 a.m.)

My Observations and What to Expect

* Futures are flat heading into the open.

* Both Asian and European markets were mixed in trading.

* S&P 500 1200 is quickly being left in the dust and the new battle ground will be the 52-week highs set in November at 1,227.

* The current rally has the makings of what we saw back on Sept. 1, when we rallied for more than two months.

* Yesterday’s rally, on similar volume to that of Wednesday’s rally, offered the continuation that the bulls were seeking, and further legitimized this market rally. A push above 1,227 would likely trigger another wave of short covering.

* Going forward, I would expect the dip buying to be back in play for investors.

* The U.S. dollar is at an inflection point on its current upward trend. A push below the trend would signal further bullishness for the broader markets. A bounce followed by another leg up would pose a major problem for the bulls.

* The bears must defend the resistance at the November highs. A break there could see S&P rally as high as 1,260s and potentially into low 1,300s (best-case scenario).

* The bulls should look to close above the aforementioned resistance and push the rally into overbought territory.

Actions I Will Be Taking

* Will consider adding some additional long positions to the portfolio today.

* Tightened the stop-loss in Petrohawk Energy Corporation (NYSE: HK) and DIRECTV (NASDAQ: DTV) to protect current gains.

* Closed positions in Ralcorp Holdings, Inc. (NYSE: RAH), Equity One, Inc. (NYSE: EQY), Equity Residential (NYSE: EQR), VistaPrint NV (NASDAQ: VPRT), ITT Corporation (NYSE: ITT) and FTI Consulting, Inc. (NYSE: FCN).

* Added Novellus Systems, Inc. (NASDAQ: NVLS), VMware, Inc. (NYSE: VMW) and Range Resources Corp. (NYSE: RRC).

* Follow me in the SharePlanner Chat-Room today for all my live trades, including my day trades.

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