Stocks finish the day flat, but up nicely so far in 2010. We expected the "January Effect" to happen at the beginning of the week and it didn't disappoint. This is when investors that sold equities at the end of last year for tax reasons decide to put that money back into the Market during the first few trading days of the New Year. This gave us a nice pop on Monday and stocks haven't given back all that much since then. Today was a fairly quiet session with the indices finishing the day not too far from where they started.

Traders weren't too fond of this morning's lackluster ISM data. The reading for December came in shy of expectations and this seemed to dampen the mood on the Street. According to the Institute for Supply Management's services index, the U.S. services sector remained flat with a reading of 50.1 in December. Although this was up from November's 48.7, any reading below 50 means contraction while a number above it signals expansion. Today's reading appears to be right on that fence and didn't really cause much of a reaction. Of course, it was a little disappointing because analysts were looking for a reading of 50.5 for December.

Graphic from Briefing.com

The other big news this morning was from the ADP Employment Services report, which is often used as a gauge of how the non-farm payrolls will come in on Friday. This morning's data from ADP showed a smaller-than-expected loss in the private sector in the month of December. The company announced a loss of 84,000 jobs last month while also revising the prior month's numbers to show a loss of only 145,000 jobs in November. December's job loss was the smallest number since the spring of 2008.

This afternoon, the minutes from the Central Bank's December meeting were released. The notes showed that some policymakers wanted the committee to expand its $1.25 trillion program to buy mortgages. This was in conflict with the current plan to start closing out the program starting this spring. The release of the FOMC minutes didn't have a very large impact on trading this afternoon. It mostly affected treasury prices, which fell due to the inflation worries.

The price of crude rallied today despite a surprising build in supplies. The Energy Information Administration announced an increase of 1.3 million barrels last week. This was quite a contrast to a drawdown of 1.6 million barrels that analysts were predicting ahead of the release. By the end of the session, oil was up by $1.41 a barrel on the New York Mercantile Exchange at $83.18.

Today's Economic Reports

It was a narrow trading range for the Dow Jones Industrial Average today with the large-cap index not varying much farther than 50 points in either direction. The Dow nudged up one point today, taking the index up to 10,573 points. After finding its way above the 10,500 point mark last week, it now appears that 10,600 is providing a little resistance for the large-cap index. Let's see if this is temporary or if it's going to be a tough level for the Dow. On the downside, the Dow appears to have found some nice support from its 20-day moving average (light blue line).

The S&P 500 also has bumped up against a new level at 1,140 points, but it hasn't really tested the new level just yet. The index rose 0.62 of a point in today's trading and finished the day at 1,137 points when the closing bell rang. Similar to the Dow, the S&P 500 is also finding some nice support from its rising 20-day moving average (light blue line). Let's watch to see if this continues to be the case if we see any selling later in the week.

The Nasdaq Composite changed roles today when it was the drag on the Market. Instead of leading the rest of the indices higher, it was the tech stocks that were holding everything else back. The Nasdaq finished the day in red territory when it lost 7 points and closed at 2,301 points. We're going to need this index to find some strength if we're going to keep the Market moving higher the rest of the week.  

After Friday's pop in the VIX (CBOE VOLATILITY INDEX), it has been nothing but red candles since. The index continued falling in today's trading when it gave up 0.19 of a point to finish the day at 19.16. As long as the VIX remains weak, it should mean good news for the bulls.

Things got a little interesting for us today with our tech spreads. While the drop in GOOG and PCLN weren't ideal, we're still sitting in decent shape across the board. Remember, as long as we can avoid multiple days in a row of heavy selling, we should be able to outlast any downturn. It appears the opposite of the "January Effect" was taking place in tech names. Instead of taking profits in the big gainers from last year, some investors waited to lock in profits until 2010. Whether this is the case or not, some of the bigger winners from last year in the tech sector took some big hits today.

Regardless of the reason, we still like how we're sitting in these spreads. Just like a sports team with a big lead, we just want to run out the clock and walk away with our nice profit again this month. For our other spreads, both the RUT & OEX couldn't be sitting much better at this point in time. We have huge cushions and not a lot of time remaining. For now, let's take a look at each spread in a little more detail.

PCLN 200-190 BULL PUT SPREAD (15 Contracts entered on 12/29/09)

PCLN CLOSED AT $219.08 Today (19.08 points away from our put spread)

Profit potential of $35.00 per contract

Contingent Stop Order set at $202.50

It wasn't a very good day to have four letters in your ticker. Priceline certainly fit this description and felt the pain as traders dumped this stock like it was going out of style. Watching a $7.48 loss is never fun; keep in mind, however, that we're still up on the week due to the strong sessions we saw on Monday and Tuesday. The only thing we didn't care for was the fact that it dropped below its 20-day moving average (light blue line) on the daily chart. We would have liked it to hold above this level. But with almost 20 points of breathing room in this spread, let's not get too concerned unless we see a few more days like today.

RUT 580-570 BULL PUT SPREAD (15 Contracts entered on 12/31/09)

RUT CLOSED AT $637.95 Today (57.95 points away from our put spread)

Profit potential of $40.00 per contract

Contingent Stop Order set at $585.00

The RUT wasn't able to hold in positive territory at the end of the session, but it gave up only 0.54 of a point on the day. Even with this small set-back, we're in much better shape right now than we were heading into this week. We have nearly 60 points of breathing room in our put spread and tons of great support on the chart. Let's just sit back and in enjoy the ride in this one for the time being.

OEX 490-480 BULL PUT SPREAD (15 Contracts entered on 12/31/09)

OEX CLOSED AT $524.31 Today (34.21 points away from our put spread)

Profit potential of $35.00 per contract

Contingent Stop Order set at $492.50

The OEX also ran into a little trouble today when it gave back a fraction of a point. But like the other two spreads we looked at already, we're still up on the week. We have an extra ten points in this one from where we stood just three days ago and like what it's showing us on the chart. The index has broken through a decent resistance level at $520 and hasn't slowed down much. Let's see if it can continue marching up the chart the rest of the week.

GOOG 580-570 BULL PUT SPREAD (15 Contracts entered on 12/31/09)

GOOG CLOSED AT $608.26 Today (28.26 points away from our put spread)

Profit potential of $35.00 per contract

Contingent Stop Order set at $582.50

Google definitely took it on the chin today when it shed 15.73 points and closed at $608.26. One day after the company announced it was going to be selling its own cell phone through its online store, the stock took a beating. Today's move took it back to its 20-day moving average (light blue line) on the chart with fairly high trading volume. While the increased volume was not a good sign, we still have a decent cushion in this spread and believe the selling will be short-lived. Let's keep a close eye on this moving average as well as its rising 50-day moving average (red line). We also haven't ruled out the idea of adding another layer to our put spread if we see a decent premium pop up over the next day or two. For now, let's watch it closely but not get overly concerned until we see another day or two like today.

As always, Trade Happy and Trade Smart