MELT UP CONTINUES

Many of the picks I made on Tuesday (actually late Monday night) are making decent moves. Most of the other ones are flat. This is a critical area in the market right here. There are a lot of signals that a correction is imminent...but the market has ignored some of these signals in the late year/new year melt up. I still like a lot of those bullish patterns that I listed a couple of days ago. I could see the market making one last push though the end of the month as earnings season kicks off this Monday, but I could also see it selling off through this period. As a hedge on your bullish (call option) positions, consider buying some calls on the VIX (or VXX) as a hedge on these positions. I don't see much downside potential on the VIX over the next few weeks, but I do see potential for a spike up in the VIX during this period. This is starting to feel a lot like April of 2010. If the S&P 500 closes below its 10 day MA, I think that a larger correction could be underway. I don't normally use trailing stops on my option trades...but if your bullish trades have already made a decent move up, consider moving your stop up to your entry price (breakeven). This way, if the market suddenly reverses, you will get out near breakeven. Meanwhile, your VIX trade could then possibly make you a nice profit. If the market continues higher over the next few days, the bullish trades should continue to move higher. The VIX trade would probably lose some money initially, but it could end up breaking even or making money later on in the month if a bigger correction comes after earnings season. The pattern on the dollar index looks very bullish. You can trade the dollar using UUP. The dollar often (not always) trades inversely to the market. If the dollar goes up, it often means the market will go down. This relationship isn't always exact...at least not on a day to day comparison. Today the market was up and the dollar was up. I think that buying calls on the UUP could also be a good hedge against a market sell off. MU looks like it is bumping into some resistance around $8.78. It could pull back to around $8 before busting through that resistance. If you are in that trade, you might want to consider taking some profits or tightening up a stop (if you are using a trailing stop). SLW had some fairly bullish price action today. If it can get above its 10 day MA, it might be a good bullish trade. This is a critical area for gold and silver. They looked like they could be starting a larger correction, but buyers came in at the end of the day. This could lead to one more possible move higher. If that happens, it could be sudden and spectacular. Many commodity traders predict possible $80 to $100 dollar swings in gold within the next few weeks. If the GLD can build on today's late session buying, I could easily see the bullish crowd coming back for one last rally. I will be out of town next week, so this might be my last posting until Monday the 17th. Keep an eye on the earnings. Alcoa (AA) kicks off earnings season on Monday the 10th. I've already told you of a possible bearish trade on that stock going into earnings. Have a great week.