Morning Thoughts January 5

In the two trading sessions so far this year we have simply digested the big up-gap from Tuesday morning.  Overnight tonight futures quickly dipped below yesterday's low and after a very strong ADP employment report are right now near the unchanged line compared to yesterday's close at 4PM ET.

Yesterday's session was marked by strong consumer/apparel stocks performance.  Stocks like LULU acted well and may have further upside still.

For our parts we added a new Bucket 2 long position yesterday: CROX.  The stock managed to move past initial resistance yesterday and looks to have room up to the $18 area eventually.  We will keep it as a Bucket 2 position for now and should it continue to act well after a few weeks we may even turn it into a Bucket 3 holding…we shall see.  Please see the blog post from  yesterday,

Our short position in SBUX yesterday did some bleeding but technically and structurally the stock still looks ripe for some mean-reversion to the downside before ultimately potentially resuming its uptrend.

Our targets on the S&P 500 in the near-term remain 1290-1300 and 1340-1360 beyond that.

Many investors, retail and institutional have taken much risk out of their portfolios and as such now remain underinvested…that includes major hedge funds.  If and when they would have to chase the market again stocks will get a serious lift higher.

The transportation stocks as well  as small caps and others need to get going to push this market higher.  See the chart of the transportation ETF (IYT) below here.  A push above $91 may do the trick.  Also note the higher lows (gray bubbles).

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