Stock Options Traders – Buy a Breakout – Go Small, Stick with Commodity Stocks and Take Profits!

After a big run-up last week, the market has been able to hold its gains over the weekend. Global markets did not provide much impetus this morning. Europe was generally down 1% as earnings weighed on the market. Hawkish statements by the ECB also contributed to the weakness. The Bank of England added liquidity by setting up a 50 billion pound credit facility where commercial banks could swap AAA rated mortgage back securities for treasuries. This move is similar to what the Fed did hear. In Asia, Japanese stocks rallied and Chinese stocks dropped. The Shanghai Index was down 4% on worries that tightening could strangle growth. China has been in a steady decline since last October. Bank of America reported a 77% drop and net income and $3 billion in charge offs. The bank did not lower dividends and that was seen as a positive. Conversely, National City had to scramble to secure private equity and that stock is down 24% this morning. The real fireworks will unfold as the week progresses. AKS, STLD, HAL, TXN, MCD, PH, BTU, SII, BA, FCX, UPS, WLP, AFL, AMZN, CMG, FFIV, QCOM, TEX, AET, MO, BG, DO, OXY, POT, ZMH, AXP, BIDU, BUCY, RIO, DECK. DV, MSFT, WDC, and WEN are stocks to watch. The market is right on an intermediate term resistance level and it will take good news to push it through. If it is able to do so, we might also see some short covering. For today, I am expecting a relatively quiet day as the market tries to hold on to its gains. I don't believe the earnings after today's close will provide a spark since most of them are from the financial sector. Before tomorrow's open, the news should be positive. Steel (AKS, STLD), agriculture (CPO, DD) rail (BNI, CP) and energy (BHI, ECA, HSC, BTU, SII) should fuel the market. As the week progresses, we will move away from the financial sector and traders will be able to evaluate a much broader base of earnings. The momentum is to the upside. Major resistance lies at SPY 144. If the market is able to breakout, get on board. Stick to commodities stocks, trade small size and take profits. The likelihood of a major rally through SPY 144 is slim ahead of the FOMC and Unemployment next week. There is a good chance that we have already seen the range for today as very quiet trading sets in.

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