Almost every single start to a new year, I am witness to and a part of seemingly the same thing (whether the year turns out to be a good or bad one for Wall Street). Namely, every trader I know (including myself) has this extra surge of adrenalin at the start of the year in an effort to make this year “the best ever.” Understandable. But there are three major issues. First, the ‘big boys’ and big-time machines come back today as well from vacation. And they are just forming their battle plans. Thus they usually don’t rush to start a year. Second, particularly in the first two days of the year- other than merger stories and brokerage upgrades- there tends not to be much newsflow. Everyone is inundated as well as they get the new year started thus most companies refrain from releasing major news immediately (unless it is very very good). Finally, the net of the first two tends to lead many traders to press and take chances they wouldn’t normally take in an effort to get things started. They feel that they have a long time to catch up if wrong much less putting themselves on the board if right. Well, what really does happen is that there is an occasional big move to start a year but the big thing that resumes is volume albeit usually not to ‘normal’ levels until a few days into the year. Also, when it does get busy in a couple or three weeks as earnings season gets cranking, most traders tend not to be quite as focused on that adrenalin as they were weeks previous. I know. I see it in fellow traders and speak from vast experience in my own trading account. Thus if nothing else- realize that as you map out your year in your head this morning- trading performance is a marathon rather than a 100-yard dash. Don’t rush into things you shouldn’t do this morning and don’t hold yourself back either from ‘normal’ trades out of fear of losing on Day One of 2011. Basically, treat today like you would almost any other trading day and don’t get swallowed up by the extreme desire to have a monster day today all the while keeping your eyes on the calendar in realizing there are about 230 more trading days left this year (with many of them likely more news-filled and volume-filled than today will be).
Markets overnight rallied world-wide. Hong Kong rose 1.7%, Frankfurt 1.4%, and Paris jumped 2% to start the year. Oil is up 2/3%, gold is flat, bonds are up a touch, and the dollar is lightly mixed. Construction spending (0.2%) and the ISM Index (57.3) are due out at 10AM. Futures are starting the year out very strong with the S&P 500 ahead double digit handles while the Dow is indicated to open ahead almost 100 as of this writing. A combination of hope for the new year along with stories such as The Bank of America $2 home loan charge are sparking the rise. For the day. Look for conditions to rapidly become choppy on heavier volume but still below average. With a dearth of news, the focus will likely be on the financials, relative weakness plays (particularly as the morning progresses), rare earths, and microcap A-B-A2 plays.
Reiterating-
If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified.
If something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified-
Good- The following stocks have good news and/or a strong technical pattern
UAM- closed near a high upon announcing it sold its Medicare prescription drug business to CVS
CHGS- closed near a high
LVS, WYNN- closed near a high
POT- closed near a high
AFOP- closed near a high
BAC- sees $2 billion charge on home loans in playing defense against potential Wikileaks story
Bad-The following stocks have bad news and/or a weak technical pattern
MCP- closed near a low
NFLX- closed near a low
BIDU- closed near a low
AMZN- closed near a low
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