12:40pm (EST)
Futures were showing a strong open ahead of this morning’s bell but a weaker China PMI number took the air out of the balloon that has led to today’s weakness. Some analysts are blaming it on tax selling but in any event, the bears are pushing near-term support.
We mentioned at the start of the week and on Tuesday that we expected the market to trade lower today as the first trading day of the new year has historically been bearish. Although the small-caps have been up the last 4 years on the first day back, overall, the Russell 2000 has been hammered 14 out of the past 23 years.
The rise in the S&P Volatility Index ($VIX, 14.04, up 0.31) to start the week confirmed our suspicions and we said to be weary of a run to 15. If this level holds there could be a continuation to the rally, if not, the bears could push 17.50-20. This would mean a lower market over the near-term.
Tomorrow is the official last day of the Santa Claus rally and it is usually a bullish day. The second day of the new year has seen the blue-chips trade higher 14 of the past 19 years. If support holds, buyers could return tomorrow.
Today is also the start of the “first five days” and we will cover this theory in this weekend’s Weekly Wrap. It is an important event and is usually a good indicator on how January and perhaps the rest of the year will play out.
As we head into the second half of trading, the Dow is down 130 points to 16,446 while the S&P 500 is off 16 points to 1,832. The Nasdaq is lower by 39 points to 4,137 and the Russell is declining 13 points to 1,150.
Our portfolio is light and while we were expecting to get into new trades today, we may have to wait to see how the second half of trading goes. The good news our Watch List is packed like a turkey on Thanksgiving as we have a number of call option (and put option) trades to play the market’s next major move. We just have to be patient.
We have 3 Profit Alerts to start 2014 as we took half off the table in Tuesday’ action and protected the rest for one trade while another trade is up 117%. Our third trade has returned a solid double-digit profit but we will likely be back in the name shortly as we still believe there is more upside potential in the stock. Our other trades are in great shape and continue to shine so we don’t have to rush the action, either.
Subscribers, check the Members Area for the updates and stay locked-and-loaded into the close in case we do take action on a New Trade.
