EARNINGS SEASON KICKS OFF WITH ALCOA

Earnings season has officially begun with the earnings report from Alcoa. The majority of the major companies report earnings starting around the second week in January, April, July, and October. This 3-4 week period is often referred to as "Earnings Season". Traditionally it is Alcoa (AA) that kicks it off. Alcoa's earnings report wasn't spectacular. It will be interesting to see how the market reacts to it tomorrow. If I were explaining the perfect conditions for a pull back, I would point to these current market conditions. The market is overbought, but the traders are overly complacent as reflected in the Volatility Index (VIX) which is near 15. The first big earnings report was not great. The DOW just closed above 11,000 and the S&P 500 is just 4 points away from 1200. These could all be reasons why the market pulls back a bit. However...this market has not been acting normal. This is why I am anxious to see how it trades tomorrow. I am staying with my recent bullish picks, but I will recommend taking some profits off the table. AT&T (T) and Continental Airlines (CAL) made big moves up after I recommended them last week. Walmart (WMT) broke a bit below the support area I was watching. I never got confirmation to get into that trade. If it can rebound and start to move up in the next day or two, I might recommend it again...but for now, let it go. If you have decent gains in T or CAL, you might want to consider selling some contracts to lock in some profits. I still think they can go higher (if the market wants to keep moving higher), but you never want to get too greedy...especially in this market environment. If AAPL or BIDU gap down tomorrow at the open, I might buy puts and place a stop above today's high. If they don't gap down, I'll wait to see how they close. If the market looks to be selling off and the VIX spikes up, I'll look to get in at the market close...again looking to place a stop above the most recent high. If they move higher tomorrow, I'll keep waiting...patiently.