11:00pm (EST)

The bulls won the first week of 2010 as they took the market higher despite a weak unemployment report on Friday.  The Labor Department said employers slashed 85,000 jobs in December while Wall Street had forecast a slight decline of 8,000 job losses. 

The one silver lining was the government revised November’s unemployment figures to a gain of 4,000 jobs, marking the first monthly increase in almost two years.  Although the unemployment rate remained at 10% last month, the bulls managed to blow off the report and finish the week on a high note.

All three indexes posted gains for the day and for the week which could mean good news if you believe in market history.  Usually if the Dow is up in the first week of January it leads to a good month and year so goes the theory. 

The Dow added 11 points on Friday and 190 for the week to close at 10,618.  Our near-term target remains 10,800 and this could be the week we take it down.

The S&P 500 gained 3 points to close at 1,145 and for the week the index added 30.  In August, we set our target at 1,175 so we are within spitting distance…

As far as the Nasdaq, we clearly saw the strength in Tech back in the summer and set a year-end 2009 target of 2,275 for the index.  That level was taken out before Christmas.  On Friday, the Nasdaq displayed its muscle once again and had the biggest percentage gain as it added 17 points to close at 2,317.

We remain bullish and our portfolio has consisted of mainly call options since March 2009.  We have added put options as “insurance” along the way but we still feel like the market moves higher from here.  Of course, once our targets are hit that could all change but the beauty of getting a pulse on the market is that it allows you to change accordingly.

If and when we reach those aforementioned targets, we either, continue higher, stay flat, or retreat to lower levels.  The cards to figuring out the next six months on where the market could be headed are being dealt right now.  A lot of investors and traders will be ready to pay the “big blind” this week as 4Q corporate earnings start to come in.  We will go over this more on Monday morning.   

There is one stock we wanted to cover again tonight before we sign-off…

We have mentioned OSI Systems (OSIS, $31.64, up $2.75) a lot lately and we should have already been in this trade to be honest.  Sometimes there are trades that just stare you in the face and they have to slap you to get your attention.

Well, OSI is punching us in the gut and we are gasping for air.

The alleged failed boxer bomber has heated up the talk of faster deployment of full-body-imaging machines at airports around the world.  Talk about blowing up the family jewels…Our thoughts from December 31st (quotes are from that day):

OSI Systems (OSIS, $27.46, up $2.40) is up 10% as investors rushed into the stock starting on Monday.  The company makes these “body scanners” that could be used in airports that would allow tighter, faster security and the machines are selling for $150,000 a pop.  Needless to say, the market is enormous and some people think they should be in every airport in every city RIGHT NOW.

The shares have rallied following last weekend’s failed terrorism attack and last Thursday they closed at $22.  On Monday morning they opened at $23.04 and hit a high of $24.97.  Usually these types of trades fade but we underestimated this story and it cost us a sweet call option trade.

Yesterday, the OSIS January 25 calls (UOJAE, $2.95) easily doubled and were under $1 on Monday.  OSIS and others have been put on our short-term Watch List. (END)

Folks, the January 25 calls are now at $6.60!  The January 30 calls (UOJAF, $2.10, up $1.55) soared a whopping 280% on Friday after opening at 95 cents. 

Despite reservations from Congress, privacy advocates and airlines we think this movement has legs and we will take a look at a possible option trade in this one on Monday morning before the bell.  We will also have an update on all of our current trades which will be on the move this week.

As we head to press, Dow futures are showing strong gains as they are up 36 to 10,602.  S&P 500 futures are up 5 to 1,146 while the Nasdaq futures are higher by 8.  The first trading day of “January Expiration Week” is usually bullish, which is one reason we left most of our option trades open. 

Also, we have been seeing higher closes on Friday’s followed by solid Monday’s which leads us to believe the bulls are fully committed to taking the market higher. 

One important factor on if the market is at a top or continues higher will come on Friday.  January options will expire and over the past decade this has been a terrible day for the market.  If the bulls can lift this curse then we could be off to the races again.

Portfolio Update:  Our 2010 portfolio track record is posted in our Members Area and had been updated as of Friday’s close.  There are 3 closed trades with two of them showing triple-digit gains; A123 Systems (AONE, $21.51, down $0.65) is profiled showing our subscribers banked a 119% gain; a 90% profit in Imax (IMAX, $14.13, down $0.29); and a 150% return in Green Mountain Coffee Roasters (GMCR, $81.85, up $0.27).

We still have 6 open trades but some will be closed for double-digits gains while we roll new trades in.  That is what we love most about the market…there is always a trade. 

The 2010 portfolio is viewable in the Members Area at the bottom of the page.  We will start releasing the closed trade results to the public at the end of the month and they will be updated as we close them out but we wanted to give you a sneak peak before then. 

We will be busy all week and will be back in the morning with the playbook.  If you are not yet a subscriber you can still catch all of the action before the opening bell if you signup now!

See you in the AM…

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