7 Jan 2011

Market Overview:

The market rally temporarily ran out of steam today. The employment report and Bernanke's testimony before congress will be the big market movers tomorrow. Here's what I'm thinking on the jobs report:

Much better than expected: Market initially rallies then sells off as the dollar strengthens.

Much worse than expected: Market initially tanks then rallies as the dollar weakens.

Pretty much in line: Market slowly grinds higher.

Bernanke will probably say he's going to keep QE2 going and promise low interest rates forever, so that will likely provide a positive boost to stocks, but the employment number will be the big deal tomorrow.

SPY Option Trading:

I still have my open sells on the weekly 128 calls and weekly 125 puts. I'm hoping to keep SPY below 128 tomorrow and have all my weekly options expire worthless. I'm still holding the 22 Jan 2011 126 calls short as still expect a pullback to at least the 125 level before expiration.

Key Levels in the SPY:

Resistance: 127.50, 127.75, 128 (pre-market high this morning)

Support: 127.20, 127, 5-day SMA (~ 126.85 right now), 126.50, 126.25

Individual Stock Trading:

CHK:

CHK has rallied quite a bit since the middle of December. Today it put up a shooting star candle as it failed to hold above 27. This makes for an obvious stop on a short trade. If I have enough capital I will look to short CHK around current levels (~ 26.75) with a stop at 27.50 (above today's high) and a target around 25 (a potential area of support).

NFLX:

I'm still keeping an eye on NFLX, waiting for it to break out of the 175-185 trading range.

FDX:

FDX is another stock stuck in a trading range (92-94). I'll be looking to play it in the direction of the break.

See my trading log below for my current open and closed positions for the month.