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Monday Solid, Tuesday Follow Through?

The rally has legs but look for selling opportunities


Current Long Positions (stop-losses in parentheses): 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 (7:45 a.m.), Redbook (8:55 a.m.), Factory Orders (10 a.m.), FOMC Minutes (2 p.m.)

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.

* The rallies of Sept. 1, and Dec. 1, saw decent 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 500) 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 one to two 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.

* Boise Inc. (NYSE: BZ) rallied well yesterday, and will live to fight another day. I do have my eye on Blue Coat Systems (NASDAQ: BCSI), should it fail to recapture its breakout level today.

* Goldman Sachs (NYSE: GS) and NVIDIA Corp. (NASDAQ: 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 Peabody Energy Corp. (NYSE: BTU), Apollo Group (NASDAQ: APOL) Owens Illinois (NYSE: OI), and Eastman Chemical Co. (NYSE: EMN), 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.

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