Trade Ideas for 12/02/09

The market opened with a gap up and stayed above the gap all day. Because of the staggered way the S&P and Dow open, it's hard to see the gaps on the index charts, but SPY/DIA show these gaps well. The past couple of weeks the chart looks like it's been blown to smithereens: so much action taking place outside regular trading hours that during regular market hours we're just getting the tail ends of moves:

So it's been a tough environment to trade, both long and short. Last week's flight to safety was short-lived, as this week the dollar continues to drop, bringing everything else up. Today's gap up and hold invalidates the bearish interpretation of recent price action, but the market continues to churn, showing resilience rather than strength. We've been rangebound, and if this continues, the market should turn down from here. However, a breakout from this range may be in the cards. The trading range is over 3 weeks old now, which is far longer than these topping ranges have lasted in the recent past. It could be basing for a final hurrah. The Dow saw new recovery highs intraday today, beating highs from last week. On the other hand, the Nasdaq/S&P haven't yet broken their highs from mid-November. And as before, the secondary indices such as the Russell 2000 and the banking sector are a month or more removed from their highs and have since begun trading below their 50-day moving averages. A very mixed picture that suggests that strength in the large caps is enough to hold up the market, and weakness in the smaller issues and certain sectors is not enough to bring the market down.

We were stopped out of the majority of our positions. If you chose to sell only on a close below the sell-stop, use today's low as the new sell-stop. We bought AONE. HMY gapped up above the buy price and never came back down.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Addl Exit Guideline	Chart
TWM (trending)	27.58	28.71	+4.1%	27.27	N/A	Chart
AONE	16.81	16.72	-0.5%	15.79	N/A	Chart

The question for the next few days is whether the market is basing for a move up, or if the topping range pattern holds true to form. The setups on the short side are not ideal, so be cautious in your risk.

New Trade Ideas

Ticker	Entry	Exit A	Exit C	Chart
ABK (Ambac)	0.86	0.76	N/A	Chart
RTN (Raytheon)	52.06	51.48	50.85	Chart
ARIA (ARIAD)	2.36	2.21	2.13	Chart
SH (Short S&P 500)	53.28	52.82	N/A	Chart
MZZ (Ultrashort Midcaps)	24.66	24.08	N/A	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.