RIMM BLEW AWAY ESTIMATES LAUNCHING OUR JAN 65 CALLS TO A FOUR-DAY SIXTY-TWO PERCENT PROFIT!

This past week proved to be extremely profitable...

RIMM BLEW AWAY ESTIMATES LAUNCHING OUR JAN 65 CALLS TO A FOUR-DAY SIXTY-TWO PERCENT PROFIT!

Plus our other new play for the week--the BGZ--is already in profit territory but if things play out like we think there will be HUGE gains to be made in the New Year.

We've got some new cash to work with and two new outstanding new plays to multiply it with--but before we get to them let's take a good look at...

WHICH WAY THIS MARKET IS HEADED

The SP-500 continues to trade sideways with no conviction one way or the other. This looks like fund managers biding their time to sell in the new tax year--and this coming week's holiday low-trading volume won't likely change the sideways trend seen above.

The Nasdaq remains at the top end of its range helped by the same big cap techs that kept the S&P afloat on Friday. RIMM, APPL and CELG were the big Nasdaq stars.

The Nasdaq has moved from a bullish uptrend to a rising wedge pattern and this pattern normally resolves to the downside rather than breaking higher--although the trend above looks up this is actually a bearish pattern.

Unfortunately there is little news over the next two weeks to power techs to a breakout. All the major tech stocks have reported earnings and we are approaching the point before the pre-earnings season where earnings warnings are more likely than guidance upgrades.

The continued failure at resistance on the SP-500 is a sign there is no bullish conviction. Traders are buying the dips but they are also shorting the highs. The charts suggest the level that will fail first is support rather than resistance.

The dollar rally last week was the strongest in eight months. Fueling the rise was the ongoing debt crisis in Dubai and sovereign debt downgrades on Greece, Spain, Italy and Mexico. Analysts believe it will only be a matter of time before the UK loses its AAA rating as well.

Plus other credit issues in Europe are heating up--the PIIGS (Portugal, Ireland, Italy, Greece and Spain) are weak and the threat of an Eastern European collapse is weighing on banks--especially European banks.

Some analysts believe this dollar strength is just profit-taking as traders exit their positions before year-end. The "short the dollar, long commodities" trade is getting old and it appears to be reversing--at least for awhile. Gold is struggling to hold the $1,000 level and we saw what happened to crude oil when the dollar spike began.

If this is just an end of year position adjustment then early January could see another reversal. However, every time we get more news about an improving US economy we get that much closer to a Fed rate hike--and when that happens the dollar will begin a long-term rally just like it did when rates went up back in '80.

The problem now is the US government itself would have a very difficult time paying higher interest rates on its own debt because the amount of debt is so monstrously out of control and there appear to be no intentions for reeling it back in.

Debt in the US is at extreme levels and it spans from the government, to the states, to municipalities, to individuals. Banks borrowed $285 billion in total last year and 75% of them have paid back their TARP funds at the cost of diluted stock holder equity. Unfortunately, Freddie Mac, Fannie Mae, AIG and GMAC require immediate funding and these bailouts could reach $1 trillion. The needs of these 'too-big-to-fail' entities will vastly exceed what has been paid back by the banks, creating a new cash outflow and an even more unsustainable debt.

Personal balance sheets are also weak and in the last few days we learned that credit card defaults are on the rise. Almost 15% of all mortgages are either delinquent or are in foreclosure. And less than half of all baby boomers have even $100,000 saved for retirement. Baby boomers represent a full 25% of the total US population so this workforce moving form tax contributors to tax consumers doesn't bode well for the country's long term economic prospects. Don't take this information as 'gloom and doom'--it's just facts to take into consideration.

Unfortunately the nations--and the worlds--debts won't go away by printing more money. The only real result of that action is deeper debt and less options for the indebted. The majority of the market believes 2010 will close higher than it opens--and it may--it's just a little difficult to understand where all this organic (real) growth is going to come from.

As much as has been said about the faster growing emerging markets they are still dependent on consumption from the developed nations--and there is still too much debt for consumer demand to revive in the foreseeable future. Within the coming year we'll also see the up until now 'infinite' resources of the Federal government reach their limits.

But that's next year--for now the indexes will likely stay in their ranges until year-end. Once into January we could see a sharp but temporary decline--the question is...

HOW DO WE MAKE MONEY ON IT?

We've got two excellent looking trades lined up this week and as you may have guessed they are both bearish. The good news about these two is we don't have to wait until some New Year's breakdown to profit because they've both broken support and are heading south right now.

And if the breakdown does come in January it will likely add greatly to the downside momentum of both of these stocks--and with their options relatively inexpensive the profit potential is huge.
We've got two great plays lined up on a market teetering on the edge--so let's get to it...
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