Editor's Note:

After a very rough 2011 the S&P 500 managed to close flat on the year. Looking ahead 2012 may not be so kind. The EU mess in Europe will continue to dominate headlines, especially with Italian 10-year bond yields hovering at an unsustainable 7%. In the short-term we're going to see the Q4 earnings season begin soon.

Investors are already nervous. If corporate America fails to offer positive guidance looking ahead then money managers are going to be quick to sell equities and place their money in safe haven investments (which could mean even lower yields on the U.S. 10-year note).

I am also cautious on stocks. Technically some of the major averages, including the S&P 500 index, have built what looks like an inverse (bullish version) of a head-and-shoulders pattern. A breakout from this pattern would forecast a rally toward the 2011 highs. Yet there are a lot of obstacles in the road ahead. As Europe struggles with its toxic debt mess the world is growing more and more concerned with Europe's largest trading partner: China. There seems to be less confidence in China's ability to manage a soft landing for its economy. I am duplicating some of my comments from tonight's wrap here. Needless to say the market's path in 2012 will like be another volatile journey.

I am not adding any new trades tonight but we did add three new candidates to the watch list. Bullish investors might want to take a look at Alexion Pharmaceuticals (ALXN). I was tempted to add ALXN as a bullish trade given its recent breakout past resistance at $70.00 but the stock does not have any LEAPS available to trade.

-James