These Relatives Don't Borrow Money--They Pay You Money!

Relative Strength and Relative Weakness are the kind of relatives you want--here's why...

This week's picks from the Daily Report demonstrates the power of trading relative strength and weakness. Take a look at these two stocks subscribers could have jumped on just a few days ago. One pick is up 390% and the other is up 290%!

A few days ago (January 3rd), POT was featured in the Daily Report as the "long of the day". Subscribers could have purchased the Jan $170 calls for $.87. Today, they have traded as high as $4.28. That is a 390% profit to start off the New Year!

Then last Friday (December 31st), ZUMZ was featured as the "short of the day". Subscribers could have purchased the January $25 puts for just $.50. Today, they traded as high as $1.95 producing a 290% profit in a week!

These stocks were just recommended this past week and you could have been in them. Get the 'relative edge' by signing-up for the Daily Report today. You'll get two new trades each day and a Live Update table ranks all of the stocks on a watchlist so you know right where to look for the strongest candidates. Subscribe now! http://www.optionssuccess.com/

Market Commentary - Yesterday, the market staged an impressive rally after ADP reported its strongest private sector job growth – ever. Analysts were expecting 100,000 new jobs and 300,000 were added in December. Private sector employment is the key to a sustained economic recovery.
Analysts scrambled to revise their expectations for Friday’s Unemployment Report. Most have bumped their projections up by 40,000 and anything less than 180,000 will be viewed negatively. Initial jobless claims have been dropping consistently and the four-week moving average is declining. This bodes well for tomorrow’s number. Seasonal adjustments to initial jobless claims made the number look better last week and that was reversed this morning. All told, the number is encouraging and we should see decent job growth tomorrow.

Last week, Chicago PMI jumped dramatically. That pop in manufacturing was supported by a better-than-expected ISM manufacturing number and stronger factory orders this week. Yesterday, ISM services also beat expectations. Retail sales, consumer sentiment, GDP and durable goods orders have all improved and economic activity is rebounding.

The FOMC minutes revealed that the Fed is steadfast in its commitment to quantitative easing. It feels employment conditions are tenuous, housing is poor and inflation is benign. The safety net of lower interest rates is also adding to investor confidence.

The economy will benefit from lower taxation. Republicans and Democrats agreed to extend the Bush tax credits and to lower payroll taxes. With more money in their pockets, Americans will spend. More than two thirds of our economy is dependent on consumption.

Holiday sales have been strong and earnings should be good. We are two weeks away from the beginning of earnings season and stocks typically rally into the announcements.

January is typically a bullish month. This is the third year of a presidential term and that has also been bullish historically.

Last weekend, China released its PMI. It declined slightly to 53.9, but that was anticipated. China has raised bank reserve requirements and it recently bumped interest rates up a quarter-point. These measures have barely slowed their runaway economy.

The credit crisis in Europe is not likely to impact the market for at least a month. The ECB has plenty of money in its coffers to support bond auctions and China said that they will buy Spanish debt. In the absence of a credit crisis, the market will rally.

Stock prices look a little tired, but I do not see them declining much. Money is rotating out of bonds and gold as investors gain confidence. Asset Managers are waiting for a pullback, but I don’t believe we will see one after yesterday’s strong employment number. Stocks should continue to grind higher as long as European interest rates stabilize.

If tomorrow’s Unemployment Report shows strong private sector job growth then buy in the money call options. Positions should still be relatively small. The key is to hit singles on the way up and so you don’t get blindsided by a selloff in Europe. We will be watching those auctions very closely.

We've been finding excellent opportunities on both sides of the market making it easy to carry both long and short positions--in this market it's important to be able to profit in either direction. I recommend a weighting favoring the upside by a margin of 3:1 to take advantage of the trend but still allowing your shorts to provide a nice hedge. In some cases (like ZUMZ), your hedges will make money as the market moves higher.

Trade well,

Pete


Important Note: Options Success provides two high-probability stock set-ups every day the market is open but DOES NOT provide specific buy or sell recommendations relating to the options on those stocks--the specific option, strike price, month of expiration and other decisions are made by each trader individually based on the strategies they've selected---customer feedback shows the most successful subscribers use the strategy guidelines suggested in our Options Success Trading Package.

If you have not already purchased the Options Success trading package and signed up for our daily stock picks we highly recommend you do so (your options account will thank you!) Click on this link to get started http://www.cashflowheaven.com/os




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