Good morning traders,

I am on semi-vacation this week so I will keep these comments very short and to the point.  In fact, I’m writing this at 2AM, so I am just going to publish bullet points and will revise if anything significantly changes before the open.  Some of these thoughts maybe be from a macro perspective and may be more relevant to swing traders… or so we think.  For daytraders, we can find good play on the “wrong” side of a trend sometimes (for instance, buying oversold points in a downtrend), but there are some forces in work that have the potential to shape markets over the next 6-12 months, so these things are worth our thought and attention.

• The US Equities market is the strongest of major world markets.  This means we need to keep a careful eye on the laggards (China, Brazil and Hong Kong) as serious weakness in any of those markets could 1) crater those markets because they are potentially vulnerable to technical breaks and 2) spill over to our domestic markets.
• In addition, it is also worth taking a few seconds pause to marvel at the great rally US stocks have had this year, in spite of all the naysayers and talking heads explaining at every step why the market could not continue up.  If you were influenced by any of this “advice” (noise) this year, commit next year to approaching the market as a trader — trust your ability to read the market and ignore irrelevant opinions.
• Financials are the sector to watch as they have been depressed (on a relative basis) to levels not seen since the Financial crisis.  Most of you know I’m not a big fan of blindly applying the concept of “oversold” stocks or sectors, but this is a case where a deeply oversold sector could catch a bid and offer some really good day and swing trades.
• Energy and Basic Materials and Industrials continue to lead the market higher every day.  (Did you know that?  If you are an active trader and you did not, you need to take a serious look at how you study the markets.)  When the market is weak, these come off a bit harder, but this is just the way market leaders act.  Daytraders should focus much of their attention on whichever of these sectors is in play on any given day.
• The US Dollar is in a bit of a precarious spot technically, but there is no clarity here.  In the short-term, we have seen a lessening of some recent asset class correlations to the US Dollar, but this will change if there is a significant move in the currency.
• The rally in Gold and Silver has taken a pause, and could even be due for a significant correction, but it is fairly unlikely we will see a big move here before the end of the year.  Regardless, anything can happen so keep an eye on Gold futures every day.  Until they are really in play, metals and mining stocks will probably be very difficult plays for daytraders, so avoid them unless you see a really clean setup.
• Copper and the precious metals are not one and the same.  Copper is pressing into significant multi-decade resistance, and keeps making new highs for the year as Gold and Silver languish.
• Interesting things happening in Cotton, Sugar and Coffee…. there may not be a lot of tie in to your day to day stock trading, but these moves are worth studying as there are many good lessons here.
• Most importantly, we are seeing very sub par markets for daytraders, which is to be expected coming into the end of the year.  Every day, there are great plays in really in-play stocks, but if you are trading the market or market stocks… this kind of trading is not fun.  Try to stay out from under the bus tires, maybe even take some time away.
• We have not seen great second day followthrough on many stocks.  Normally, big moves on day offer good play the next day, but the recent pattern has been big move and then… nothing.  This is simply reflective of the reduced volume and volatility at year’s end.
• For nearly everyone, today’s gameplan can be summarized as this:  Only take the absolute best trades in the best stocks in the best sectors for the day.