3 Jan 2011

Market Overview:

As the new year begins it looks like the market wants to go higher. We may see a repeat of January 2010. Last year we had a nice rally the first week in January when everyone was expecting a pullback. This squeezed out the remaining shorts. The market did eventually rollover later in the month.

I'm seeing a lot of individual stocks in a consolidation pattern. AAPL, RIMM, AMZN, SNDK for example. If these stocks break higher then they will likely take the broad market with them.

SPY Option Trading:

Despite my short-term bullish thinking, I'm currently short the SPY via selling naked 22 Jan 2011 SPY 126 calls. I'll be looking to sell some weekly (7 Jan 2011) SPY 127 calls on a pop this week. To the downside we should have support at 125 and then 124 in SPY. I'll be looking to sell weekly SPY 123 or 124 puts on a pullback this week.

Individual Stock Trading:

USO:

If we get another rally in oil this week I will look to short USO. This short is mainly a fundamental play. I don't think the economy will be able to support oil prices at > $90 barrel for long. I'll look to short USO around 39.50, with a stop of 40.50 and a target of 37.50.

RIMM:

RIMM is trapped between its 50-day and 200-day SMA. I still like RIMM to pop higher here. Admittedly, I should have pulled the trigger on this trade last week. I will look to get long if RIMM breaks above 58.50, with a stop of around 57 and a target of 65.