The first trading day of 2010 saw stocks get a boost from many of the same themes that delivered such tidy returns in 2009. Strong commodities trade, a weak dollar and a rise in financial stocks all helped equities move higher on Monday. After closing 2009 with a triple-digit loss, the Dow Jones Industrial erased all of that loss and then some, gaining nearly 156 points to close within striking distance of 10,600 at 10,583.96. The S&P 500 finally moved well above resistance at 1120 to finish the day at 1132.99, good for a 1.6% gain. The Nasdaq, far and away the best performer of the three major indexes in 2009, got off to a good start in 2010, gaining more than 39 points to finish the day at 2308.32.

Stats Table

For those of you that are bulls and fans of market theories and history, Monday's trade was probably an encouraging sign. The ''January Effect'' may have been in full effect on Monday when considering how the market finished 2009. The premise behind the ''January Effect'' is that stocks tend to rise in the first month of the year, particularly in the first week, after investors sold losing positions late in the previous year for tax benefits. The capital is then redeployed early in the new year with the hopes of buying stocks at better prices.

Historical analysis shows that small caps are often the best performers under the ''January Effect'' so it may not have been surprising to see the Russell 2000 turn in an impressive 2.35% gain on Monday.

Russell 2000 Chart

Getting into the weeds of the value investors place on January, the Nasdaq historically finishes the first week of the new year higher two thirds of the time. From there, nearly 57% of the remaining weeks show the Nasdaq moving higher. The S&P 500 closes higher during roughly 57% of the year's first week and then turns in positive weeks 56% of the time and the Dow closes higher for 54% of the year's first week with remaining weeks being positive almost 56% of the time.

The charts I have included below are a little dated, but they do illustrate the potency of the ''January Effect.'' The first highlights the frequency of the continuing January's trend for the rest of the year while the second illustrates the efficacy of buying small caps early in the year. Of course it should be noted that stocks were down in January 2009 only to turn in one of their best years on record, so there are exceptions to the rule.

January Effect A

January Effect B

As I mentioned earlier, many of the familiar themes that helped fuel the rally of 2009 were in play again on Monday, namely the commodities and materials trade. Crude oil closed higher for the eighth consecutive day with February futures settling at $81.65 per barrel, the highest closing price since October.

Crude Chart

Dow components Exxon Mobil (XOM) and Chevron (CVX), the two largest U.S. oil companies, were up 1.4% and 2.7% respectively. Chevron likely benefited from a bullish write-up in Barron's over the weekend. The energy sector also saw renewed speculation regarding oil majors making their way into the natural gas business. Just three weeks after Exxon announced it would purchase XTO Energy (XTO) for $41 billion, France's Total (TOT) said it will spend $2.25 billion to gain access to Chesapeake Energy's (CHK) Texas natural gas fields.

No, this is not an all-out acquisition by Total and yes, Exxon's tie-up with XTO dwarfs the Total-Chesapeake partnership in dollar terms, but Total's $2.25 billion buys it a 25% stake in Chesapeake's Barnett Shale assets. Chesapeake is the second-largest driller in the gas-rich Barnett Shale. The bottom line is Total is the world's fifth-largest oil company. It has a market cap of $147 billion. Chesapeake is worth just under $19 billion. If Total wants to buy Chesapeake outright, it could probably do so quite easily and in the wake of the Exxon-XTO marriage, investors speculated as to who the next companies to run to the altar might be. Chesapeake came up as a target and Total fits the bill as the type of firm that wants to expand its North American nat-gas presence.

Another commodities-related name that certainly started the new year on the right foot was Bucyrus (BUCY), the maker of mining and earth-moving equipment. Bucyrus enjoyed a boffo run in 2009, gaining more than 150%. As if that was not enough to encourage some positive analyst sentiment, two sell-side analysts issued positive comments on Bucyrus today, helping the stock gain more than 11% to close at $62.68. That is just 11 cents off the 52-week high, which was touched earlier in the session.

Morgan Stanley now rates Bucyrus ''outperform'' with a $71 price target after previously not rating the shares, saying that the company's recent $1.3 billion acquisition of Terex's (TEX) mining business is not being appreciated by the market. Morgan Stanley has an interesting view of appreciation and I say that because Bucyrus is up about 15% since that announcement was made. Barclays Capital chimed in as well, raising its price target on Bucyrus to $73 from $64 and boosting its 2010 earnings estimate to $3.55 a share from $2.90.

One could try to be bearish on Bucyrus, but the chart below shows that might be an especially painful endeavor.

Bucyrus Chart

Even the beaten down oil refiners were in the green on Monday after Deutsche Bank upgraded Frontier Oil (FTO), Sunoco (SUN), Tesoro (TSO) and Valero (VLO). Deutsche said demand is improving and if that trend continues, OPEC will be forced to boost production, which would improve margins for the refiners. Frontier Oil and Tesoro were upgraded to ''buy'' from ''hold,'' leading to gains of 8.3% and 9.3%, respectively. Sunoco and Valero were upgraded to ''hold'' from ''sell.'' Sunoco gained 6% on the news while Valero was up 6.8%.

Of course good news in the commodities space is usually bad news for the dollar and that was the case on Monday when the greenback retreated against 15 of the 16 major currencies, including declines of 1.7% against both the Australian dollar and the Mexican peso and a loss of 1.5% against the New Zealand dollar, according to Bloomberg News.

Dollar Index

Dollar weakness often invites gains for riskier fare and that was evident in the performances of a couple of South American indexes. Argentina's benchmark stock index rose to a record and Brazil's Bovespa, one of 2009's top performers, shot above 70,000 for the first time in 18 months, Bloomberg reported. Combine oil's recent run, the dollar's decline and the bullish view on Brazilian equities and you have a very nice day for the iShares MSCI Brazil Index (EWZ), the largest Brazil-focused ETF. EWZ was up nearly 3.5% on Monday to close at $77.19 and if it can eclipse its November peak of $78.39, it could take out $80 in short order.

EWZ Chart

All of this stock and sector-specific news aside, this week is fairly important on the economic news front as well. With another earnings season set to begin shortly, this week's economic data points could weigh on investor sentiment. The FOMC minutes from December's meeting are released on Wednesday and if you are thinking that there is even a faint chance of rate hike in 2010, this event is worth watching. Most notable of the week's news releases will be Friday's non-farm payroll number. As Jim noted over the weekend, the consensus estimate is for a gain of 25,000 jobs in December.

While a gain is better than another month of lost jobs, the number must be taken in proper context, meaning that most of the added jobs were likely of the seasonal nature. That means that many of the folks that took those jobs will once again find themselves looking for new employment in the coming weeks and February's jobs report could be quite dour.

Taking a look at the charts, the Dow looks like it has snapped out of a six-week long trading range that saw 10,265 hold as support. Today's close above 10,583 puts the Industrials within earshot of 10,600 and that level could be surpassed as early as Tuesday. Still, volume is light as traders work their way back to their desks from holiday vacations and it is not unreasonable to expect many will be cautious to start the new year.

Next resistance for the Dow looms at 10,750, but it would not be surprising to see the Dow absorb some declines over the near-term to rid itself of the weak hands before positioning itself for another move higher. If support at 10,265 does not hold again, moves to 10,000 and then to 9500 could be in the cards.

Dow Chart

The S&P 500 has now cleared the hurdle that was 1120 and Monday's trade could be taken as a positive sign after the index closed around 1115 on Thursday, worrying some investors that the new year may start with a move below 1100. Now the issue becomes the S&P 500's to build on this momentum. Failure at these levels would likely take the index back to 1115 and if that area does not act as support, a move to 1085 could be seen. Any significant move below 1085 could mean a hasty trip to 1010-1020.

S&P 500 Chart

One day certainly does not beget a trend, but the Nasdaq's strong performance on Monday may indicate that 2009 was indeed no fluke. The Nasdaq looked like it was trying to breakout last week, but Thursday's sell-off quelled that notion. If the index becomes range-bound, it should be between previous support at 2280 and 2315. A break below 2280 would not be pretty because that will bring 2150 into play and from there things become significantly less attractive.

Nasdaq Chart

Overall, it is hard to overlook Monday's gains, but to use a baseball analogy, we are not even through the first inning of a nine-inning game. The return of normal trading volume (hopefully) as the week goes along could be one telling sign about what January will bring as will Friday's job report. It will be interesting to see if the market can gain some new leadership beyond commodities, financials and tech. The emergence of just one or two previously ignored sectors could be just the elixir the bulls are looking for to continue 2009's rally in 2010.

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