Despite a troublesome jobs report on Friday, stocks rally late in the day. The highly anticipated non-farm payrolls couldn't keep the Market down last week. While the subpar report dampened hopes of a stronger recovery, the bulls showed up late in the trading day on Friday, helping the major indices to finish the week in positive territory.

The move higher on the final trading day of the week was a little in doubt after the disappointing non-farm payrolls were released. Ahead of the release, the Street was looking for a flat reading for December. But unlike expectations, the actual report showed a loss of 85,000 jobs last month.

The only bit of good news in the release was that November's job loss had a positive revision. The government revised its previous report to show an actual gain of 4,000 jobs in November. This was the first report of jobs being added to the economy and was certainly better than the loss of 11,000 jobs that was originally reported. However, the chart below shows the turnaround last month with jobs once again being removed from the economy in December.

Graphic from Briefing.com

The revision in the previous month's job report probably helped keep the unemployment rate from rising last month. As expected, the nation's unemployment rate held steady at 10.0% in Friday's release. While this was better than an increase in the rate, keep in mind that it still stands near a 26-year high.

Graphic from Briefing.com

It was a flat session for the price of crude on Friday. It settled up a mere $0.09 a barrel higher at $82.75 a barrel on the New York Mercantile Exchange. While crude struggled, gold moved higher. Thoughts of interest rate hikes in the future helped the shiny metal to rise $5.10 an ounce to finish the week at $1,138.20 a troy ounce. Of course, it was also helped by the weakness in the dollar.

Friday's Economic Reports

Friday's late-day rally in the Dow Jones Industrial Average helped the large-cap index secure a winning week. For the first five trading days in 2010, the Dow is up 190 points. The strong start helped put the index up 1.82% for the New Year while breaking through another decent resistance level on the daily chart at 10,600. Friday's advance of 11 points helped the Dow finish the trading week at 10,618 points. Let's see if it can continue moving north next week.   

The S&P 500 fared even better than the Dow last week when it climbed nearly 30 points over the first five trading days of 2010. Friday, it rose 3 points to finish the week at 1,144 points while marking its best weekly performance in two months. This also puts the S&P 500 up 2.68% for 2010, now that's not a bad start to the New Year. On the daily chart, it also broke right through the old barrier at 1,140 and just kept moving north. Let's see if this continues as we enter the new week.  

The Nasdaq Composite struggled for the last few trading days, but turned that around on Friday when it surged 17 points. This helped the tech-laden index finish the week up 2.12% while sitting above a resistance level with its closing price of 2,317. Let's see if it's able to hold onto this momentum as we start the new trading week.   

Friday was another significant session for the VIX (CBOE VOLATILITY INDEX). The "fear index" fell to another significant low on Friday when it tumbled 0.93 of a point to finish the week just above a 52-week low at 18.13 points. Another session like Friday's and the VIX could slice right through the 18 point level.

We had one spread giving us a lot of concern last week, but even this one was able to turn things around Friday afternoon. Google had a rough stretch last week but the rally on Friday afternoon now leaves us in pretty good shape heading into the final trading week of the January option cycle. As long as we can keep tech from another sharp sell-off this week, we should be able to coast to a nice profit for the first cycle of 2010.

However, this week does mark the beginning of the earnings season, which could provide a bumpy path to the finish line for us. The good news is that our index spreads are sitting so far out of the money that we shouldn't have any concerns in those positions. Let's keep a close eye on tech because that's the only real concern for us this week. With that said, let's take a look at how we're sitting in each position heading down the home stretch.

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

PCLN CLOSED AT $216.21 Today (16.21 points away from our put spread)

Profit potential of $35.00 per contract

Contingent Stop Order set at $202.50

Priceline made a nice move to the upside on Friday around the noon hour, but then couldn't hold onto a majority of its gains by the time the closing bell rolled around. Unlike most stocks that surged late in the day, PCLN was only able to cling to a $0.08 gain at the close, leaving the stock 16 points above our "short" strike price at $216.21. On the daily chart, PCLN has found some support from a low in the middle of December. As long as this level continues to provide support this week, we should be in good shape. We also like the fact that its 50-day moving average (red line) continues to rise on the chart. This line should also be some nice support for the stock in case there's more selling. We like how we're sitting in this one.  

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

RUT CLOSED AT $644.56 Today (64.56 points away from our put spread)

Profit potential of $40.00 per contract

Contingent Stop Order set at $585.00

We really couldn't ask to be sitting much better in this spread heading into the final week of trading. The small-cap index continued to break through old resistance levels on the daily chart, helping to extend the cushion in our put spread. With us now holding nearly 65 points of breathing room in this spread, we shouldn't have anything to worry about this week.

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

OEX CLOSED AT $527.76 Today (37.76 points away from our put spread)

Profit potential of $35.00 per contract

Contingent Stop Order set at $492.50

The OEX also continued to march higher on Friday, making us even more comfortable in this position. The index advanced 1.42 points on the final trading day of the week, leaving the OEX at $527.76. With time running low, we should be able to coast to the finish line in this one with ease. We don't see anything to concern ourselves with in this position.  

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

GOOG CLOSED AT $602.02 Today (22.02 points away from our put spread)

Profit potential of $35.00 per contract

Contingent Stop Order set at $582.50

Google was the one position causing us to take notice last week when it started to tumble on Wednesday and continued to sell-off through the beginning of Friday's session. However, it rallied nicely about a half hour into the trading day on Friday and then kept moving higher. It finished the day up $7.92 at $602.02. With the company set to release earnings in 11 days, we don't see this one falling much farther. We'll continue to monitor this one closely this week, but we really don't mind where we're sitting in this one for the time being. But even with this said, make sure your contingency stops are set just in case something unforeseeable happens. It's always better to be safe than sorry. 

As always, Trade Happy and Trade Smart

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

We finally got the selling we wanted on Thursday, helping us to fill the rest of our spreads. It has been a truly challenging two weeks for our new trade alerts. The Market has refused to fall, making it impossible for us to get filled in our new put spreads. However, that turned around on Thursday as the Market fell hard on the final trading day of 2009. This helped us get filled in all of our new trade alerts heading into the New Year.

The initial claims number released before Thursday's opening bell was very optimistic news for the Market. The actual number came in much better than the Street was expecting when the government said that new jobless claims fell by 22,000 last week. This brought the seasonally adjusted number down to 432,000 for the week ending December 26. Ahead of the report, consensus was calling for 460,000 new claims. The chart below shows how drastic the decline has been since topping out nine months ago at 674,000.

Graphic from Briefing.com

It was a fairly flat session for crude on Thursday as it settled up $0.05 at $79.36 a barrel on the New York Mercantile Exchange. However, it did lock in its largest percentage gain since 1999 with its 77.94% move last year. Gold also moved up on the session when it rose $3.70 an ounce to settle at $1,095.20. This pushed the shiny metal to its largest yearly gain since 2007 with its advance of 23.95% for 2009.

Thursday's Economic Reports

It was sort of an ugly finish to the bullish year on Friday when the Dow Jones Industrial Average lost 120 points to finish the year at 10,428 points. While it was red on Friday, it was definitely all green for 2009 with the large-cap index climbing 18.82% on the year. This was its largest percentage gain since 2003. On the daily chart, the Dow pulled back to its 20-day moving average (light blue line) on the chart.

The S&P 500 also struggled on the final trading session of the year. It fell 11.32 points on Thursday to finish the year at 1,115. Despite its ugly finish, the index still locked in a 23.45% gain for 2009 and its best yearly performance in over six years. On the daily chart, the S&P 500 is sitting a little higher than the Dow, above its 20-day moving average (light blue line), but certainly did turn over on Thursday. Let's see if it's able to hold above this moving average on Monday and Tuesday.

The Nasdaq Composite slid 22 points on Thursday, but still had an outstanding year. It was definitely the year to be in tech stocks with the Nasdaq climbing over 43% in 2009. Its closing price of 2,269 on Thursday meant that last year was the Nasdaq's best one year performance since the same index gained 50% in 2003.

The selling on the final trading day of the year was good news for the VIX (CBOE VOLATILITY INDEX). The "fear index" rose 1.72 points to finish the year at 21.68. This was the most significant move we've seen out of the index in the past two weeks. It also took the VIX back above its 20-day moving average (light blue line) on the chart. The big test for the index will be if it's able to make it up to its 50-day moving average (red line).

It took a full week, but we finally got filled in all of our new trades. We've been looking for a round of selling this large for the past two weeks but had to wait until the final session before the New Year before we actually saw it show up. Traditionally, we see some selling towards the end of the year as investors dump underperforming stocks for tax reasons. Perhaps it's because of the strong gains during the past year that we didn't see this really play out this time around. In the past, we also usually get a nice bump during the first couple of trading days in the New Year as investors then put that money back to work by purchasing securities. We'll have to see if this plays out on Monday or Tuesday.

If this does happen, this should be perfect for our new put spreads. Now that we're filled, we would love nothing more than to see a nice move to the upside, extending our cushions. But even if we don't get this, we still like how we're sitting in all of our spreads heading into this week. Let's take a closer look at all of the positions.

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

PCLN CLOSED AT $218.41 Today (18.41 points away from our put spread)

Profit potential of $35.00 per contract

Contingent Stop Order set at $202.50

Priceline had a tough trading day on Thursday when it fell below its 20-day moving average (light blue line). The stock appeared to find some nice support from this line on Wednesday, but the selling on Thursday proved too much of a problem for PCLN. The stock finished the session near its low with a $5.20 loss. This took it down to $218.41 and ate into our huge cushion in this position. However, we're still sitting in very good shape heading into this week. Let's see if the stock is able to find some support and reverse last week's negative trend in the next few sessions.  

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

RUT CLOSED AT $625.39 Today (45.39 points away from our put spread)

Profit potential of $40.00 per contract

Contingent Stop Order set at $585.00

The small-cap index finally ran out of steam on Thursday. After bumping up against resistance at its high for the year, the RUT rolled over. It finished the session down $8.02 at $625.39. This loss put the small-cap index into negative territory for the week at a minus 1.4% for the four sessions. But even with this loss, we like how we're sitting in our put spread. It might have been difficult getting into the spread, but we're sitting in really good shape heading into this week with our 45 points of breathing room in this one.

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

OEX CLOSED AT $514.09 Today (24.09 points away from our put spread)

Profit potential of $35.00 per contract

Contingent Stop Order set at $492.50

The $520 mark was just too difficult for the OEX last week. After failing to break through this resistance barrier, the index turned south. After Thursday's loss of $4.82, the index settled at 514.09 points. The OEX finished the week just above its 20-day moving average (light blue line) at Thursday's close. This week, we'll be watching to see if it's able to stay above this mark. After this line, the next stop is probably its rising 50-day moving average (red line).

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

GOOG CLOSED AT $619.98 Today (39.98 points away from our put spread)

Profit potential of $35.00 per contract

Contingent Stop Order set at $582.50

Google certainly ran into some selling on Thursday, but was still able to hold up fairly well considering how the rest of the Market fared. The stock shed only $2.75 on Thursday to finish the week at $619.98. On the chart, it appears to be running into some resistance in the area of $625. Regardless, we appear to be sitting just fine in our put spread with the stock nearly 40 points above our "short" strike price. We should be able to just sit back and relax in this one for the time being.

As always, Trade Happy and Trade Smart

We saw a little more red today, but nowhere near the kind of selling that we needed for our trade alerts. It felt like another uneventful session with stocks somewhat stuck in a range for the third straight session and the trading volume continuing to be fairly light for the second holiday-shortened week in a row. Although there was some selling, we still struggled to get any fills. We'll make some adjustments for tomorrow, but first let's recap today's uneventful session.

The lone piece of economic data this morning came from the Chicago Purchasing Managers Index (PMI). The data didn't disappoint the bulls today when the PMI climbed to 60.0 in December. This jump surprised most traders, who were looking for a decline in the index ahead of the release. Today's number was a nice increase over the 56.1 reported in November. This shows improvement in both production and new orders in the Midwest. Similar to most of the charts we've been looking at lately, the one below shows a nice bump from its bottom at the beginning of the year.

Graphic from Briefing.com

In the only other report released today, the demand for oil and gasoline both increased last week, but not as much as analysts were expecting. Today's inventory report released by the Energy Information Administration showed that the U.S. supply of crude dropped by 1.5 million barrels last week. While the increase in usage was expected during the holiday week, it wasn't quite the level that traders were looking for. Ahead of the release, consensus was calling for a drop of 2.2 million barrels for the week. At the same time, gasoline supplies declined by 300,000 barrels last week. This number was also much less than the drop of 2.2 million barrels that was predicted. Despite the disappointment in the EIA numbers, oil still managed to gain $0.41 a barrel to finish the session at $79.28 a barrel on the New York Mercantile Exchange.

However, the trading today seemed to revolve around the rising dollar. It appears that money is flowing into the greenback as a way to hedge against future rate hikes by the Central Bank. With economic conditions improving, investors are betting against possible inflation and a pull-back in the easy money that the Fed has been pouring into the system over the past year and a half. The strength in the dollar spelled trouble for most commodities today. Gold tumbled $5.50 per ounce to settle at $1,091.50.

The financial sector was in the news today with troubled financing firm GMAC facing some serious pressure. According to various reports, the company is expected to receive a government bailout to the tune of another $3.5 billion in the near future. This should help keep the company afloat. Of course, it already has received $13.5 billion in U.S. government funds. After all, what's another few billion when it's coming from the taxpayer?

Today's Economic Reports

It was light volume across the board today with very little volatility. This kept the Dow Jones Industrial Average in a small trading range. This trading range was mostly in the red territory today, but the large-cap index broke into the green at the close today. The Dow settled up 3 points on the session at 10,548. The index appeared to gain some support from the old resistance level on the daily chart. Let's watch to see if it's able to continue holding above this barrier.

The S&P 500 also managed to creep into positive territory at the end of the session. The index climbed 0.23 of a point to close at 1,126.42. The S&P 500 also seemed to find some support near an old resistance level on the chart. It'll be interesting to see if it's able to finish the week with a gain tomorrow.

The Nasdaq Composite certainly had a tough session yesterday with all of the trouble out of the tech sector. However, it was able to bounce back and lead the Market higher for most of the trading day. It closed up 2.88 points at 2,294.28. This helped the tech-laden index earn back some of its losses from yesterday and put the Nasdaq back into positive territory for the week. Let's see if it's able to stay there tomorrow.

The range-bound trading meant there was little movement in the VIX (CBOE VOLATILITY INDEX). With the gains in the indices at the end of the session, this took the VIX lower by 0.24 of a point. It settled below the 20 point barrier at 19.47 points.   

We're finally starting to see some red this week, but it hasn't been nearly enough to get most of our spreads filled. While we'd love to sit back and wait, we're starting to run out of time with another holiday break taking place on Friday. Due to this and the fact that that premium has really started to dry up, we're going to once again make some adjustments to our remaining trade alerts. We've been extremely patient this cycle, but so far we haven't been rewarded. Let's get slightly more aggressive with these adjustments and see if we can get the remaining spreads filled tomorrow morning. There's nothing we'd love more than to have five nice spreads working for us heading into the New Years Day Holiday this weekend.

NEW TRADE ALERT (3)

Please Note: These are Day Orders and Limit Orders.

RUSSELL 2000 INDEX (RUT)

OPENING 580-570 JANUARY BULL PUT SPREAD (15 contracts)

Sell 15 January Puts at 580 strike price

Buy 15 January Puts at 570 strike price

Total Credit 0.40 per contract

Potential Profit $600.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if stock reaches $585.00.

S&P 100 INDEX (OEX)

OPENING 490-480 JANUARY BULL PUT SPREAD (15 contracts)

Sell 15 January Puts at 490 strike price

Buy 15 January Puts at 480 strike price

Total Credit 0.40 per contract

Potential Profit $600.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $492.50.

Google Inc. (GOOG)

OPENING 580-570 JANUARY BULL PUT SPREAD (15 contracts)

Sell 15 January Puts at 580 strike price

Buy 15 January Puts at 570 strike price

Total Credit 0.35 per contract

Potential Profit $525.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $582.50.

RUT DAILY CHART

OEX DAILY CHART

GOOG DAILY CHART

CURRENT JANUARY POSITIONS

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

PCLN CLOSED AT $223.61Today (23.61 points away from our put spread)

Profit potential of $35.00 per contract

Contingent Stop Order set at $202.50

Priceline had a rough start to the session this morning but was eventually able to turn things around. After hitting its 20-day moving average (light blue line) on the chart, the stock reversed and was able cut its loss on the day. By the time the closing bell rang, it was down only $1.06 at $223.61. In tomorrow's session, we'll be watching to see if it's able to once again hold above this line. As long as this happens, we feel very good about how we're sitting heading into the weekend.

As always, Trade Happy and Trade Smart

We saw a little more red today, but nowhere near the kind of selling that we needed for our trade alerts. It felt like another uneventful session with stocks somewhat stuck in a range for the third straight session and the trading volume continuing to be fairly light for the second holiday-shortened week in a row. Although there was some selling, we still struggled to get any fills. We'll make some adjustments for tomorrow, but first let's recap today's uneventful session.

The lone piece of economic data this morning came from the Chicago Purchasing Managers Index (PMI). The data didn't disappoint the bulls today when the PMI climbed to 60.0 in December. This jump surprised most traders, who were looking for a decline in the index ahead of the release. Today's number was a nice increase over the 56.1 reported in November. This shows improvement in both production and new orders in the Midwest. Similar to most of the charts we've been looking at lately, the one below shows a nice bump from its bottom at the beginning of the year.

Graphic from Briefing.com

In the only other report released today, the demand for oil and gasoline both increased last week, but not as much as analysts were expecting. Today's inventory report released by the Energy Information Administration showed that the U.S. supply of crude dropped by 1.5 million barrels last week. While the increase in usage was expected during the holiday week, it wasn't quite the level that traders were looking for. Ahead of the release, consensus was calling for a drop of 2.2 million barrels for the week. At the same time, gasoline supplies declined by 300,000 barrels last week. This number was also much less than the drop of 2.2 million barrels that was predicted. Despite the disappointment in the EIA numbers, oil still managed to gain $0.41 a barrel to finish the session at $79.28 a barrel on the New York Mercantile Exchange.

However, the trading today seemed to revolve around the rising dollar. It appears that money is flowing into the greenback as a way to hedge against future rate hikes by the Central Bank. With economic conditions improving, investors are betting against possible inflation and a pull-back in the easy money that the Fed has been pouring into the system over the past year and a half. The strength in the dollar spelled trouble for most commodities today. Gold tumbled $5.50 per ounce to settle at $1,091.50.

The financial sector was in the news today with troubled financing firm GMAC facing some serious pressure. According to various reports, the company is expected to receive a government bailout to the tune of another $3.5 billion in the near future. This should help keep the company afloat. Of course, it already has received $13.5 billion in U.S. government funds. After all, what's another few billion when it's coming from the taxpayer?

Today's Economic Reports

It was light volume across the board today with very little volatility. This kept the Dow Jones Industrial Average in a small trading range. This trading range was mostly in the red territory today, but the large-cap index broke into the green at the close today. The Dow settled up 3 points on the session at 10,548. The index appeared to gain some support from the old resistance level on the daily chart. Let's watch to see if it's able to continue holding above this barrier.

The S&P 500 also managed to creep into positive territory at the end of the session. The index climbed 0.23 of a point to close at 1,126.42. The S&P 500 also seemed to find some support near an old resistance level on the chart. It'll be interesting to see if it's able to finish the week with a gain tomorrow.

The Nasdaq Composite certainly had a tough session yesterday with all of the trouble out of the tech sector. However, it was able to bounce back and lead the Market higher for most of the trading day. It closed up 2.88 points at 2,294.28. This helped the tech-laden index earn back some of its losses from yesterday and put the Nasdaq back into positive territory for the week. Let's see if it's able to stay there tomorrow.

The range-bound trading meant there was little movement in the VIX (CBOE VOLATILITY INDEX). With the gains in the indices at the end of the session, this took the VIX lower by 0.24 of a point. It settled below the 20 point barrier at 19.47 points.   

We're finally starting to see some red this week, but it hasn't been nearly enough to get most of our spreads filled. While we'd love to sit back and wait, we're starting to run out of time with another holiday break taking place on Friday. Due to this and the fact that that premium has really started to dry up, we're going to once again make some adjustments to our remaining trade alerts. We've been extremely patient this cycle, but so far we haven't been rewarded. Let's get slightly more aggressive with these adjustments and see if we can get the remaining spreads filled tomorrow morning. There's nothing we'd love more than to have five nice spreads working for us heading into the New Years Day Holiday this weekend.

NEW TRADE ALERT (3)

Please Note: These are Day Orders and Limit Orders.

RUSSELL 2000 INDEX (RUT)

OPENING 580-570 JANUARY BULL PUT SPREAD (15 contracts)

Sell 15 January Puts at 580 strike price

Buy 15 January Puts at 570 strike price

Total Credit 0.40 per contract

Potential Profit $600.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if stock reaches $585.00.

S&P 100 INDEX (OEX)

OPENING 490-480 JANUARY BULL PUT SPREAD (15 contracts)

Sell 15 January Puts at 490 strike price

Buy 15 January Puts at 480 strike price

Total Credit 0.40 per contract

Potential Profit $600.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $492.50.

Google Inc. (GOOG)

OPENING 580-570 JANUARY BULL PUT SPREAD (15 contracts)

Sell 15 January Puts at 580 strike price

Buy 15 January Puts at 570 strike price

Total Credit 0.35 per contract

Potential Profit $525.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $582.50.

RUT DAILY CHART

OEX DAILY CHART

GOOG DAILY CHART

CURRENT JANUARY POSITIONS

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

PCLN CLOSED AT $223.61Today (23.61 points away from our put spread)

Profit potential of $35.00 per contract

Contingent Stop Order set at $202.50

Priceline had a rough start to the session this morning but was eventually able to turn things around. After hitting its 20-day moving average (light blue line) on the chart, the stock reversed and was able cut its loss on the day. By the time the closing bell rang, it was down only $1.06 at $223.61. In tomorrow's session, we'll be watching to see if it's able to once again hold above this line. As long as this happens, we feel very good about how we're sitting heading into the weekend.

As always, Trade Happy and Trade Smart

Little by little we'll get our fills this month, but it's taking some time. The selling today helped us get our fill in the PCLN spread, but the rest are still a ways away. However, we still think that we're going to get a session or two of selling this week. Because of this, we still want to keep our strike prices a little farther out of the money. While they might seem like a long shot tonight, this can change pretty quickly if we get that selling tomorrow. Because of this, let's try for one more day at these strike prices.

NEW TRADE ALERT (3)

Please Note: These are Day Orders and Limit Orders.

RUSSELL 2000 INDEX (RUT)

OPENING 560-550 JANUARY BULL PUT SPREAD (15 contracts)

Sell 15 January Puts at 560 strike price

Buy 15 January Puts at 550 strike price

Total Credit 0.40 per contract

Potential Profit $600.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if stock reaches $565.00.

S&P 100 INDEX (OEX)

OPENING 480-470 JANUARY BULL PUT SPREAD (15 contracts)

Sell 15 January Puts at 480 strike price

Buy 15 January Puts at 470 strike price

Total Credit 0.40 per contract

Potential Profit $600.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $482.50.

Google Inc. (GOOG)

OPENING 560-550 JANUARY BULL PUT SPREAD (15 contracts)

Sell 15 January Puts at 560 strike price

Buy 15 January Puts at 550 strike price

Total Credit 0.40 per contract

Potential Profit $600.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $562.50.

We got some selling this afternoon, but it wasn't enough to help us with our fills. While the pull-back didn't come today, we know that it's coming. We just have to be able to use enough patience to hang in there until it takes place. With this as our plan, let's sit tight and keep throwing these orders out there as day orders and see if we get that move in our favor on Tuesday. If not, then we'll re-evaluate tomorrow night.

NEW TRADE ALERT (4)

Please Note: These are Day Orders and Limit Orders.

RUSSELL 2000 INDEX (RUT)

OPENING 560-550 JANUARY BULL PUT SPREAD (15 contracts)

Sell 15 January Puts at 560 strike price

Buy 15 January Puts at 550 strike price

Total Credit 0.40 per contract

Potential Profit $600.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if stock reaches $565.00.

S&P 100 INDEX (OEX)

OPENING 480-470 JANUARY BULL PUT SPREAD (15 contracts)

Sell 15 January Puts at 480 strike price

Buy 15 January Puts at 470 strike price

Total Credit 0.40 per contract

Potential Profit $600.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $482.50.

Google Inc. (GOOG)

OPENING 560-550 JANUARY BULL PUT SPREAD (15 contracts)

Sell 15 January Puts at 560 strike price

Buy 15 January Puts at 550 strike price

Total Credit 0.40 per contract

Potential Profit $600.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $562.50.

Priceline.com Incorporated (PCLN)

OPENING 200-190 JANUARY BULL PUT SPREAD (15 contracts)

Sell 15 January Puts at 200 strike price

Buy 15 January Puts at 190 strike price

Total Credit 0.35 per contract

Potential Profit $525.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $202.50.

Will stocks ever pull back? Not yet. Stocks continued to hit new highs for the year on Thursday's holiday-shortened session, leaving our put spreads in the dust once again. The continued march up the chart by the indices last week made it impossible for our new trade alerts. Odds keep increasing for a retracement in the Market, but so far we haven't gotten the one that we've needed. We'll discuss our strategy for Monday in a bit, but first let's take a look at the few things that did happen on Thursday.

As expected, the trading volume on Thursday was extremely light. For the week, volume reached only half of what normally is traded on an average week for 2009. Regardless, the results matter even if the trading floor was sparse and the electronic exchanges showed thin trading all week long.

We often talk about certain trends that are taking place and during the recent run it appears that traders are casting aside any negative data and are instead giving everything a positive spin. Even if we might debate the merits, we want to trade with the prevailing winds. With everything moving higher, we know that our put spreads are on the right side of the momentum, but we need to get filled before we can enjoy the ride.

On Thursday morning, the focus centered on the weekly initial jobless claims, released before the opening bell. According to the government, this rate dropped from 480,000 in the prior week to 450,000 new claims. Not only was this a nice drop from the previous report, it was also lower than the 470,000 claims that the analysts had predicted ahead of time. This data doesn't take any spinning because the continuing drop in new claims should spell good news in the next non-farm payroll report, as well as, unemployment rate. The chart below shows the nice downward trend that we've seen over the past several reports.

Graphic from Briefing.com

While the initial claims number was better-than-expected on Thursday, the durable goods orders were disappointing. The Street was looking for a jump of 0.5% in November, but the actual number came in at 0.2% for last month. Traders use this as an indication of how the fourth quarter GDP number will come in. Based on this, we should continue to see some growth in the economy. While the number was definitely positive, the low figure shows that growth remains subdued and nowhere near robust. Despite the underperformance in the report, the chart below does show a nice upward trend in the data.

Graphic from Briefing.com

Despite the weak demand, oil continued climbing on Thursday. It rose $1.38 a barrel to finish the week at $78.05 a barrel on the New York Mercantile Exchange. This helped crude gain nearly 5% during the short trading week. Meanwhile, the dollar lost ground against the other major currencies.

Thursday's Economic Reports

It was a solid week of gains for the Dow Jones Industrial Average even though it was only three and a half days. The large-cap index rose 191 points during that time frame and broke out to a new high for the year when it closed at 10,520.10 points. This helped the index finally break through that resistance at 10,500 points and hold above it. The only stocks struggling on the session were in the healthcare sector, which remains in unease over the current healthcare legislation. The rest of the Market has been continuing to march higher. Let's see if the Dow can continue climbing during the last trading week of the year.

The S&P 500 was certainly stronger than the Dow last week on the chart. It broke through its resistance earlier in the week and then continued moving north. The index advanced another 5 points on Friday to finish the week at another new high on the year at 1,126.  

The Nasdaq Composite remained the leader last week when it shot up 3.35% over the short trading week. The tech-heavy index climbed 16 points on Friday alone to finish the trading week up 74 points at 2,285. Our only question is when is it going to take a break to let us get into our put spreads?

The good news for the Market meant bad news for the VIX (CBOE VOLATILITY INDEX). The "fear index" continued sliding on Thursday, losing 0.24 of a point to finish the week at 19.47 points. If this index continues to slide, the Market is probably headed higher.  

We certainly getting tired of chasing this thing higher and we know that you probably feel the same. Sooner or later it is going to take a step backwards and that's when we'll get our fills. Until then, we don't want to get too aggressive because we know that's when we end up getting burned. We've made some aggressive adjustments for Thursday morning, which we still feel will be good entries this week if we get one day in the red. Let's stick with those same alerts for Monday and see if we get lady luck to shine our way for just one morning this month.

If we didn't have such trouble getting filled last month, we wouldn't feel so bad about last week. But there's not a lot we can do about trying to get into put spreads when the Market keeps climbing. Let's try to be the "smart money" by sitting back and using our patience. We almost always get paid well when we're patient so let's try to stick to our guns and our same trade alerts for Monday.

At the same time, we're going to add one additional trade alert for Monday. We're going back to an old favorite, Priceline.com Incorporated (PCLN). As many of you know, we've traded this one for the past two years quite frequently in both the Regular and Professional Trader newsletters. We took a break from it last month, but we like way the stock has performed lately. It is coming off a huge gap on the chart after its strong 3rd quarter earnings results, which gave us a bit of a pause thinking that it might pull back some. Instead, the stock has steadily worked its way back up the chart with no signs of slowing down. We've been bullish on the fundamentals behind this company for quite some time and now we like the technicals once again. Let's stay a tad bit conservative with our new spread, but let's still find a way to profit from the put side in this one. Keep in mind that we're still going to need a pull-back to get filled, but let's be ready in case we finally get the one we've been waiting for.

NEW TRADE ALERT (4)

Please Note: These are Day Orders and Limit Orders.

RUSSELL 2000 INDEX (RUT)

OPENING 560-550 JANUARY BULL PUT SPREAD (15 contracts)

Sell 15 January Puts at 560 strike price

Buy 15 January Puts at 550 strike price

Total Credit 0.40 per contract

Potential Profit $600.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if stock reaches $565.00.

S&P 100 INDEX (OEX)

OPENING 480-470 JANUARY BULL PUT SPREAD (15 contracts)

Sell 15 January Puts at 480 strike price

Buy 15 January Puts at 470 strike price

Total Credit 0.40 per contract

Potential Profit $600.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $482.50.

Google Inc. (GOOG)

OPENING 560-550 JANUARY BULL PUT SPREAD (15 contracts)

Sell 15 January Puts at 560 strike price

Buy 15 January Puts at 550 strike price

Total Credit 0.40 per contract

Potential Profit $600.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $562.50.

Priceline.com Incorporated (PCLN)

OPENING 200-190 JANUARY BULL PUT SPREAD (15 contracts)

Sell 15 January Puts at 200 strike price

Buy 15 January Puts at 190 strike price

Total Credit 0.35 per contract

Potential Profit $525.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $202.50.

RUT DAILY CHART

OEX DAILY CHART

GOOG DAILY CHART

PCLN DAILY CHART

As always, Trade Happy and Trade Smart

The economic data came in disappointing, but a jump in commodities helped hold up the Market. Heading into the trading day, traders were preparing for some surprises to the upside, but that didn't happen. While we did get an early drop across the board, it wasn't enough to get us filled in any new trades as the Market came back and held onto narrow gains at the end of the session.

After the existing homes sales data came in better-than-expected yesterday, everyone was bracing for the same kind of upbeat report today from the new home sales report. But that didn't happen. Instead of the increase in sales that economists had forecasted, the actual number showed the lowest number of sales since last spring. According to the Commerce Department, sales of new homes dropped 11.3% in the month of November. In the past few months we've seen much improving data during recent months, helping fuel hopes that the housing market and economy has turned the corner. Today's report dampens the mood of this taking place or at least the pace of the recovery.

Graphic from Briefing.com

The disappointment in the homes sales seemed par for the course today as far as economic data was concerned. The personal income and spending figures were also somewhat of a miss today when the actual numbers increased less than expectations. While the income was up over last month, the reading of 0.4% was less than what the Street was expecting. At the same time, personal spending actually fell in November compared to its previous report. In today's release, the government said that personal spending stood at 0.5% in November, down from the 0.6% for October according to the Commerce Department. While it was certainly a disappointment, at least the trend is still moving higher on the chart below.

Graphic from Briefing.com

Following suit on Wednesday, the University of Michigan's index of consumer sentiment also improved, but less than the Street was expecting. The index hit 72.5, which is its highest level in over two months. However, the Street was looking for a number in the neighborhood of 74.5 heading into the release. So like the rest of the economic data released today, the number was an improvement but not as good as what was expected ahead of time.

The price of crude rose today after the weekly Energy Information Administration reported a drop in supplies last week. This helped oil gain $2.27 a barrel to settled at $76.67 a barrel on the New York Mercantile Exchange. Gold also rallied with a $7.30 advance, taking the metal up to $1,093.30 an ounce. Both commodities were helped by the falling dollar in today's session.

Today's Economic Reports

The Dow Jones Industrial Average rose for the fourth straight session, although it wasn't all that impressive. The large-cap index climbed 1.51 points to finish the session just above its opening price at 10,466 points. Once again, the Dow is closing in on the resistance at 10,500 points on the daily chart. Let's see if it's able to test this barrier in tomorrow's abbreviated session.

The S&P 500 fared better in today's trading, gaining 2.57 points and breaking through its tough resistance barrier on the daily chart. The index held above this mark when it closed at 1,120 points today. Let's see if it can keep moving north in tomorrow's trading.

Out of the three major indices, the Nasdaq Composite has been the strongest this week by far. The tech-laden index surged 16 points in today's session, taking it up to 2,269. This was the fourth straight bullish day for the Nasdaq, which could make it number five in tomorrow's session if it once again finishes the day in the green.

The VIX (CBOE VOLATILITY INDEX) barely made it into positive territory at the end of the day when it gained 0.17 of a point. The "fear index" fell sharply during the first two trading days of the week and now stands at 19.71. Now that it has broken below the 20-point level, let's see if it continues falling.

We don't know about you, but we're getting tired of not getting filled. As we said earlier in the week, we really want to be in several positions before we hit the Christmas break. Because we're profiting from time-decay, there's nothing better than getting paid when the Market is closed. For tomorrow, we're going to get a little more aggressive by once again moving our strike prices up and dropping the credits. While this does reduce our profit potential, we want to at least have a few spreads working for us this weekend. Unless we get a pop on the open, we think these adjustments should do the trick.

NEW TRADE ALERT (3)

Please Note: These are Day Orders and Limit Orders.

RUSSELL 2000 INDEX (RUT)

OPENING 560-550 JANUARY BULL PUT SPREAD (15 contracts)

Sell 15 January Puts at 560 strike price

Buy 15 January Puts at 550 strike price

Total Credit 0.40 per contract

Potential Profit $600.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if stock reaches $565.00.

S&P 100 INDEX (OEX)

OPENING 480-470 JANUARY BULL PUT SPREAD (15 contracts)

Sell 15 January Puts at 480 strike price

Buy 15 January Puts at 470 strike price

Total Credit 0.40 per contract

Potential Profit $600.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $482.50.

Google Inc. (GOOG)

OPENING 560-550 JANUARY BULL PUT SPREAD (15 contracts)

Sell 15 January Puts at 560 strike price

Buy 15 January Puts at 550 strike price

Total Credit 0.40 per contract

Potential Profit $600.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $562.50.

RUT DAILY CHART

OEX DAILY CHART

GOOG DAILY CHART

As always, Trade Happy and Trade Smart

It was another tough session for getting filled in our put spreads. While we want to continue to use patience, we also don't want to be sitting back and not getting any new trades filled heading into the break later this week. Due to this, let's make some adjustments for tomorrow and see if we get a little pullback to help us get into the new trades.

NEW TRADE ALERT (3)

Please Note: These are Day Orders and Limit Orders.

RUSSELL 2000 INDEX (RUT)

OPENING 550-540 JANUARY BULL PUT SPREAD (15 contracts)

Sell 15 January Puts at 550 strike price

Buy 15 January Puts at 540 strike price

Total Credit 0.45 per contract

Potential Profit $675.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if stock reaches $555.00.

S&P 100 INDEX (OEX)

OPENING 470-460 JANUARY BULL PUT SPREAD (15 contracts)

Sell 15 January Puts at 470 strike price

Buy 15 January Puts at 460 strike price

Total Credit 0.45 per contract

Potential Profit $675.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $472.50.

Google Inc. (GOOG)

OPENING 550-540 JANUARY BULL PUT SPREAD (15 contracts)

Sell 15 January Puts at 550 strike price

Buy 15 January Puts at 540 strike price

Total Credit 0.40 per contract

Potential Profit $600.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $552.50.