EARNINGS CAUSE FOR PAUSE

S&P FUTURES; UP 12 OUT OF THE FIRST 13 DAYS OF THE NEW YEAR

After last year's big ups and big downs and all the losses it created,  the public has started out the year in a very risk reverse manner. There is little doubt about the direction but that says NOTHING for the 1.1mil ESHs (took out GLOBEX) traded on an expiration Friday. Plain and simple investors are not in a big hurry to buy the S&P as it goes up through 1300.00. On Fridays close the DOW went out up 2.4% for the week and up 4.12% YTD. The S&P closed out the week up 2.04%, up 4.59% YTD. The NASDAQ finished the week up 2.80% and is now up nearly 7% YTD. The RUSSELL closed out the week up 2.67% and is up 5.90% YTD while the VIX was down 8% on the day, down 12.58% on the week and down 21.88% YTD. So this brings us back to the old adage about “so goes Jan, so goes the year” The best way to read and lean about the Jan effect / Jan barometer is simple; go buy a copy of the Stock Trader's Almanac.

If the adage is correct history tells us we should see an up year for the stock market. As of Friday the S&P is at its highest level since JULY and the NASDAQ is advancing above its old OCT highs. So why is the public so pessimistic? We believe there several reasons and the fist being the public is still SCARED. The second part are headline like the ones I am reading this morning “ Deal on Greek Debt Swap Unlikely Before Next Week” or “US, Europe Face More Rating Cuts in the Coming Year” or “Fed Seeks Clarity But Markets Brace for Confusion”  Do you understand where I am going with this?

Jan 3rd SPH up 19.50 handles
Jan 4th SPH up .90
Jan 5th SPH up .10
Jan 6th SPH up 1.00
Jan 9th SPH up 1.40
Jan 10th SPH up 10.50
Jan 11th SPH up 2.10
Jan 12th SPH up 3.50
Jan 13th SPH dwn 2.80
Jan 17th SPH up .40
Jan 18th SPH up 12.90
Jan 19th SPH up 8.20
Jan 20th SPH up .40
+57.80 handles or +4.60%

Its 5:30 am and the SPH up .60 handles at 1311.40, crude is 98.97, up .68 cents, gold is up 12.70 at 1667.70 and the EC 129, 62, up 37. In Asia 6 out of 9 markets quoted closed higher. In Europe 12 out of 13 markets are trading modestly higher. Today economic and earning calendar starts with EU finance ministers meet in Brussels and earnings from Halliburton, CSX, and Texas Instruments Tomorrow start the FEDs first two day meeting of the New Year along with earnings from Apple Inc, DuPont, Johnson & Johnson, McDonald's Corp, Verizon Communications, and Yahoo.

Our view? The S&P is up 20% from OCT lows and at its highest level since early AUG and up 12 of the last 13 days. The SPH was down 6 handles last night and is up 1.7 handles now. We are looking to sell the early rally and buy the pull back using tight stops.

Expiration Study for JAN: Average Changes for the S&P cash

Monday (day after)  up 11 / down 17 of the last 28 occasions

VOLUME 1.4 mil ESH and 11k SPH traded
SPREADS: 40 SPH/M and 40 SPU/Z spreads traded
FV: S&P, NASDAQ

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EARNINGS CAUSE FOR PAUSE

Following GOOG earnings miss last Thursday we thought there may be some overnight risks going into Fridays expiration coupled with the “BUS GETTING FULL” on the current rally. Most traders have been looking for some back and fill on negative news, but the equities have continued to grind higher – brushing aside the news of late. With this type of price action we have to ask; is the BUS GETTING FULL? We are hitting the heart of earnings season this week and there will be chatter of selling the news as the lowered corporate expectations have been coming in only slightly better thus far. GOOG's negative impact post close last Thursday was outweighed/reversed by Fridays open. The positive reaction from IBM / MSFT & INTC supported the DJIA. The broader market has not fared all that well during the last up leg. However, there is chatter regarding possible leadership/strength in the small caps due to less European exposure leaving opinions mixed. The equities are seemingly running on fumes as the FOMC announcement / presser waits in the wings.

Fridays RTH's opening range was 1308.20 – 1308.50 and an early high of 1309.  HLCAMP (08:57:16): Normal Program Trading Low = 1305.50 // Following these reports // world powers possibly resuming nuclear reports with Iran – liquidation hit the crude market as prices spiked $2.50 lower & mts2 (09:33:44): Greek Press Reports EU Has Accepted Greek Debt Swap Terms – the equities held their ground. Despite these sensitive headlines the spoos traded in just a five handle range after trading 1304.70 LOD at 10:30. The slow grinding midday trade made a higher low 1306 at 1:30 as the expiration began to influence the last hour(s) of trade. Even with the expiration, trading volume the NYSE still didn't print $1B shares. Going into the cash close the imbalance showed $400M to BUY with 18/30 DJIA to BUY trading 1309's as we printed new highs taking out Thursday's / last week's high of 1311.30's with a 1311.50 & a 1310.90 futures settle following one of the slowest monthly expiration's we have ever seen!

MrTopStep Talks Benzinga Radio WrapUp

http://mrtopstep.com/2012/01/mrtopstep-talks-benzinga-radio-wrapup-6/

We recreated the picture – Join the FREE trial & MTS team!!!

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ECONOMIC CALENDAR: http://mrtopstep.com/economic-calendar

CONTRIBUTORS' CORNER

SPX & NasDaq CHARTS ~~Roger Volz, BGC

SP 500 Futures Weekly Chart Model……nudging through the next ledge in this time frame at 1291-1296 (trend line) . The next upside continuation in this time frame is 1308.00 with the next concentration at 1322-1325 ….. our IT momentum loss is sub 1287.00

SP 500 Futures Weekly Chart

ND 100 Futures Daily Model…..continuation above 2378……extending through the October highs and key resistance at 2408 / 2414 and the July high at 2435 brings ST OB targets into the radar, 2490-2505 . The next line of closing resistance for continuation is 2447.00. Closing support is rising to 2412 from 2386 into next week.

Weekly Chart Model….. pattern is an expanding wedge…..2462 next up is then followed by 2502-2510-2520 MAJOR where overbought would be targeted

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MTS NEWS & OBSERVATIONS:

MrTopStep & Benzinga Wednesday WrapUp Radio: http://mrtopstep.com/2011/12/mrtopstep-talks-benzinga-radio-wrapup-5/