This Is My Trading Strategy For the First Day of the New Year

Posted 9:30 AM ET - Not much has changed over the weekend. The market is over-valued and it will gap up to a new all-time high this morning. Last year we saw and opening gap higher that reversed. Watch for the bid to be tested early. If the market is able to hold the opening price for the first 2 hours we will grind higher. If the market easily gives up the gains we will probe for support and spend the day in a range. The Senate run-off will move the market Wednesday. I believe that at very least one Republican seat is priced in. If this happens it will make every Senate vote very close. All the market really cares about is that the Trump Tax cuts remain and a 1:1 split would preserve it. Swing traders should sparingly sell out of the money bullish put spreads. If we get a big market breakout, that will likely result in a buying climax and there will be selling once the high is set. This formation will likely take a week to complete. There will be very little time to take profits so stay alert. I view the current level as a low probability environment. There are no bargains here and surprise favors the downside. Day traders should focus on the long side. Do not chase the open. Make sure the bid holds. I suspect that we will see the early gains reverse. Once support is established, favor the long side. I would also be careful with shorts. The best day trading tactic will be to buy an early dip once support is established. The Senate run-off in Georgia will be very important this week. Major economic news is a week away so this will be the driver this week. The $2000 stimulus checks will also fuel a rally if it gains traction. Error on the side of caution – be patient. . .

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