Stocks rallied early this morning on very strong import and export numbers from China this weekend. Yet the market is paring its gains as investors wait for Dow-component Alcoa (AA) to launch earnings season when it reports after the closing bell tonight. Wall Street expects AA to report a profit of 6 cents per share. The average analyst price target for AA is $16. Alcoa hit new 52-week highs this morning at $17.60. Meanwhile, a sharp decline in the dollar gave commodities a boost.

Asian markets were mostly higher. As mentioned earlier the Chinese government released their December trade data. Exports surged 17.7% from a year ago, which blew away economists' estimates for a 4.0% gain. The rise in exports broke a 13-month losing streak. Imports also came in higher than expected. Economists were looking for imports to rise 31% and China said imports soared 55.9%. Many see the big improvement in Chinese trade as proof the global economy is healing. Commodities definitely got a boost on this data. Both the Chinese Shanghai index and the Hong Kong Hang Seng index rose 0.5%. The Japanese markets appear to be closed today.

European markets gapped higher on the Chinese trade data but stocks eventually drifted lower to virtually unchanged on the session. Mining stocks were hit with profit taking in spite of strength in metals. Energy stocks managed to show some strength on analyst upgrades. Dutch firm Heineken NV announced it was buying Mexico's FEMSA beer-making business for $5.5 billion. FEMSA's best know beer brands are Dos Eques, Sol, and Tecate beers. Tomorrow the British firm Tesco, one of the world's largest retailers, will report fourth quarter earnings. The English FTSE gained 0.07%. The German DAX closed up 0.05%. The French CAC-40 lost 0.05%.

Overall it's a relatively quiet news day for the U.S. markets. The early morning gains in the market are fading. Investors are waiting on the Alcoa earnings news later tonight. Intel and JPM are two more big cap names that report this week. Tomorrow KB Homes (KBH), a homebuilder, reports earnings. Currently analysts are expecting a loss of 42 cents a share for KBH.

Commodities were grabbing some headlines. The dollar's weakness and the Chinese trade data pushed oil towards $83 a barrel. Gold futures are up almost $13 and trading near $1,152 an ounce. Silver prices are up 1% but it's worth noting that silver is up several days in a row and looks overbought. The early morning gains in copper prices are fading.

Currently the S&P 500 index is trading near unchanged with a fractional loss. The small cap Russell 2000 shows a similar pattern. The NASDAQ is seeing slightly more weakness with a 0.5% decline after hitting new 52-week highs this morning. The Dow Industrials are showing relative strength with a breakout over the 10,600 level. Strength in Alcoa and Caterpillar (CAT) is definitely a bonus. Shares of CAT are soaring with a 6.0% gain to new 52-week highs. Traders should also note that the transportation index is showing strength. On Friday the sector broke out from its trading range and today's rally just confirms the move. Meanwhile technicians are concerned that traders are getting too confident with the volatility index (VIX) sinking to new multi-month lows under the 18.00 level.

Chart of the S&P 500:

Chart of the NASDAQ:

Chart of the Dow Industrials:

Chart of the Russell 2000 index:

A quick look at the OptionInvestor.com play list reveals a strong move by CAT. Readers may want to take profits early since the big one-day rally has probably inflated the option premiums. I have to warn you that the trading in IBM looks bearish with the stock about to produce a new bearish engulfing candlestick pattern. Readers may want to take profits in PCP as well. Our target to exit PCP was $118.75. Shares hit $118.62 this morning and reversed!