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Market Enters Day 2 of Digestion Phase After Fast Start to 2013

John Darsie

Major US stock indices finished narrowly in the red for the second straight day as investors are on hold for the start of earnings season. The S&P finished down only 0.32%, and is still above the start of the gap from January 2nd. The rest and digestion we have seen in the market the last two days is very positive for traders, in my opinion. We like to trade calculated set-ups, and upper level bases allow us to enter strong stocks in a prudent way.

Alcoa (AA) kicked off the always much-anticipated earnings season after the close today with better than-expected numbers. The aluminum giant earned $242 million in the fourth quarter, or 21 cents a share, after losing $193 million in the year ago period. Alcoa projects aluminum demand to grow 7% in 2013. The stock is trading 1.7% higher after-hours.

The most recent earnings season was a disappointment, but AA's report sets a positive tone at the start of this one. The bigger names start rolling in next week, but be on the lookout for the financial sector's first major earnings report Friday with Wells Fargo (WFC).

Despite the fact it was another slow day in the market, there continue to be select pockets of strength for traders to focus on. Las Vegas Sands (LVS) continued its recent run as the gambling sector was very strong today. LVS finished the day up 2.4%, and is up 17% since New Year's Eve. MGM (MGM) was also up more than 2%, while Wynn Resorts (NASDAQ;WYNN) slumped to a marginal loss.

The potent rally in the 3-D printing stocks was finally halted today, although they closed off lows. The afternoon bounce from Stratasys (SSYS) was able to reclaim more of its losses, finishing down 0.8%, while 3-D Systems (DDD) finished down 3.3%. Sodastream (SODA) is another stock that had been strong recently that sold off hard in the morning but rallied in the afternoon, finishing up 0.1%.

Apple (AAPL) remains lackluster, although it was able to finish the day with a 0.3% gain. Amazon (AMZN) took a break today after yesterday's extension to new all-time highs. Facebook (FB) pulled back a bit today as well after its recent run, finishing down 1.2%.

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*DISCLOSURES: Scott Redler is long FB, AAPL, TBT, ZNGA, GRPN, YHOO, BAC. Short SPY.