..up to Ben

Market summaries, headlines will read of an abysmal existing home sales number leading to the indices being shellacked!.  This is not true at all.  If you trade, you know it was almost the saving grace as it peaked the selling pressure and reversed a trade back into risk as TSY hit 2.5%.   We say ‘almost’ because it could have been the perfect infliction point today, if only the market didn’t peter out after finding some footing intraday after an impressive reversal!.   In all honesty,  it would have been better if the market closed near lows of the day instead of teasing to 1059 at 3:20pm and than managing to close at SPX1051.

The real destructive culprit,   leading to the open gap down and to the low 1050’s before the existing home report hit was the article alerted premarket of a "contentious” FED.  (a mega big construction co’ (CRH) bad report helped too).   Nobody in their right minds involved in the stock market wants to see or know of an argumentative, quarrelling posse at the FED!.  It’s just not healthy for an already sensitive market.   If the story is not true,  members better stand up and explain.   The market already has no idea what they are essentially doing with the last FOMC statement and this just adds to the murky picture.

Barring an unforeseen catalyst hitting before Bernanke’s Jackson Hole address,  the market should stabilize and may still reverse in anticipation of an 'Oscar' catalytic performance by Ben.  

...not all there

Following another gap down and the market down  ~5% in just 5 sessions,  we should just be happy it reversed and closed green (2% low to high), right?    Unfortunately,  that’s not enough if we want a ‘real’ bullish reversal that can last into September.  Something was missing.

Still, what the market failed to do Tuesday, it managed to do it today as an alerted possibility in the morning.   The difference in what was almost a mirror image of previous day from premarket to 10am data was that the market was able to turn green with DJIA being the last of the indicies in the afternoon to do so.   The thinking was it would trigger a different end result than the late sell off just 24 hrs before after it failed to go green.   The end result being a good close as more short covering would be come in.

So, what’s "missing"  in the reversal and good close?.   Not to knit- pick,  but if a fresh melt up for days is to ensue, the ‘metals’  are usually part of a rotation into a risk trade in the beginning.    Forget about the ‘financials’ as a necessity for a rally (which is long gone market after thought),  but the steels notably X’ and also FCX have to turn as well.     It’s surprising that as the TSY to equity rotation occurred today,  this risk trade didn’t involve the ’metals’ , basically only beaten up techs outperformed.    The probability of this reversal being the real thing is diminished by this non-action unless Bernanke pulls a rabbit out of his hat on Friday.   Still, it was a good retest of 1040 and may get more short covering into Ben’s address, but to go beyond ~1065 is not going to happen unless real conviction money/buyers shows up with metals turning.

The most interesting aspect to the market is reaction to “WORSE THAN FEARED “ , macro data last 2 days.  All this data shows is it’s not a drip, drip in the economy,  but a rapidly falling one and the market is acting as if it’s priced into the market.    This seems almost implausible as double dip chances increase day by day.   What this may signal is the market is “overwhelmingly expecting “ a short term snapback rally as we got all possible bad macro news out of the way for now.   Eventually, it will get back on the worry macro train, but for a few days it can run freely is probably all we are being told.

...Please, Ben!

As speculated yesterday,  Wednesday reversal was .."not all there”  as far ingredients for a sustained rally or even a push though SPX1065 (we got to 1062..50% retrace from bottom) and the recent profit taking on any upside ran it‘s course once again, this time to a month low close as supply of stock for sale seems endless.   The idea heading into the week was this was not going to be a “week at the beach” and it sure hasn’t as the about 30SP handles have been wiped out. 

Incredibly, coming up on the last Friday of summer is probably the most important address at 10am for the markets in the longest time….Entering the week…".. markets attention will be turning to Fridays address by Bernanke in hope of getting some light shed on what the FED did and why and what the eco’/ deflation picture is looking like!”…..plus in the middle of week we got wind of a "contentious FED”.    Well, now the day has come and Bernanke has some explaining to do on all these issues and more, if a snapback occurs this is the perfect time at the markets month low and market confidence shot.      Also, even before the address,  GDP comes out which will show a big deceleration in growth with a number <1%  possibly in the cards.    Add this possibility and you almost have to think some policy change maybe hinted at later as well.

DJIM #35 2010

Every day this week,  DJIM highlighted the importance of ‘Jackson’s Hole'.  This was in order to take everything else with a grain of salt Monday to Thursday.  This was the potentially a ‘catalytic’ event as the market had been mired in confusion since being caught off guard August 10th/FOMC.  

Today,  Bernanke heard DJIM and market cries for a ..'Oscar' catalytic performance”…”.. Bernanke pulls a rabbit out of his hat…”   Hell,  we even almost begged heading into the address…..”Please, Ben”.    

The only thing to watch as the address became public was to see the camels back get broken ($TNX ) to understand the market’s approval of the address.    It was a thing of beauty as seemingly the stars aligned from premarket…a GDP, not close to whisper # under 1%, but 1.6%, a beautifully timed INTC warning to smack SPX 1040 again in heavy selling.   BTW. This was in play here at DJIM before all the downgrades, CSCO news began in August, so this was hardly a surprise and the real money bought it up or covered fast most likely, ”(signs of technology softening demand is showing up globally (possible correction in technology coming)”.   This tech correction is a thing in progress and will last into Q4, so it’s not the end seen today just because INTC/tech rebounded hard and/or  found a long lasting bottom.

Back to TSY, the real mover of the equity market!!.   As alerted at SPX-1257,…”...Just watch the $TNX heading into Tuesday's gap,  Ben blew them out today.”.    Market was thinking 1060SPX, this weeks “R” was going to be it for this leg.   DJIM thought differently as there was no evidence in the market internals in stopping the market till 1065 as printed here this week as “R“.   Yep, right into the middle of early weeks gap 1063-1067.    Most importantly, watching the TNX, which only improved some more after a 5% steep morning move, solidified we’d head into the gap and that there would be no ‘usual’ late day selling.   Add the “something missing" from this week ...metals snap backed this time…FCX +6%, steels 4-5% and you get the drift why 1065 was possible.

Away from all the broad market hoopla, the real ‘fun’ was in small cap fever as in past years with speculative big bids entering a few plays.   On the 20th,  alerted an unknown stock that was not in traders minds as a play off MFE/INTC deal.   But, slowly and surely the past week, you could see the accumulation of shares in FTNT  as some got wind of how ‘good’ and relevant this company is.  When ARST got rumoured for a $40 takeover Thursday,  FIRE joined the fracas and FTNT popped quietly up while under radar.  Today, it was accumulated early away from all the broad market hoopla and eventually exploded to a high of $21.70 from an open under $19.  

Even NZ, off blowout earnings…(revs came in $63.8MM vs. the St $54.27MM,· EPS came in .09 vs. the St .06, we are increasing our guidance for the full fiscal year to approximately 30% annual revenue growth ), popped another 7% from alert with crazy bids coming in and out.    As all attention turned to POT recently, the real M&A play has been off the circus surrounding PAR, which has brought out momo/speculative trading in small caps.  Cool.

So, the question is today ‘the’ turning point?.  In all honesty,  it’s irrelevant as long as there are spots to trade in this market as has been the case even through a recession.   We’d like to think the Bulls have reclaimed home court advantage finishing at ~1065, but, next week we’re going to deal with China ‘PMI’ and US ISM /payroll to seal the deal or not.    What needs to happen is a return to calmness amongst investors and see real money/conviction come in and push nicely over 1065.   Bernanke may have started the ball rolling in accomplishing this.  If not, today will only be classified by next week as a ‘short covering’ and those taking a rental out on the market for 2-3 days.   It’s great Bernanke spoke positively of 2011 and almost promised the ‘world‘ to fight (with conditions though) but,  we’d be silly not to worry still about the rest of 2010 and possible retrenchment by businesses because of recent macro data, which would equate to a recession all over again with monetary accommodation or not.

short lived..

Everything that was instrumental for stocks Friday disappeared as stocks went for sale once again.  No follow through was possible as every major weekend newspaper talked of ‘double dip“ focusing on FED being out of bullets post Bernanke address, Japan’s actions reversed the TSY trade, INTC/tech trade reversed bounce (SOX off 2.5%), miners couldn’t continue snapback as volume hit lowest levels of the year.  It’s quite discouraging to conclude August/summer in this fashion as the bottom of range is likely to be in focus again.  Still, we just might be in ‘holiday' trading mode til post- Labor day before anything is determined.

We highlighted the need to follow through to get past the “R” cited here as 1065 and none of the ingredients for such were present and now Friday‘s move looks like nothing more than…..“If not, today will only be classified by next week as a ‘short covering‘ and those taking a rental out on the market for 2-3 days”.   Unfortunately, the rally didn’t even last 2-3 days,  but a single day!.  Tomorrow,  the FOMC minutes will be highly anticipated as there are still questions around that August 10th meeting and we’ve talked about have China PMI out Tuesday night, US PMI's, plus NFP coming later in the week for the market to deal with.    Today’s action was probably in part investors taking advantage of the bump Friday to take profits and avoid standing ahead of all these events/ critical macro data. 

...neverending wait and see tone..

Interestingly today, even pre-10am US macro data commodity linked stocks (WLT ANR CLF etc.) were already outperforming the market by being up 2-4%.   There was no clear evidence as to why, but the first thing that came to mind was that tonight’s critical China PMI  may have leaked.   Tonight, solid results (suggest deceleration may be stabilizing) are in from both the official and HSBC August manufacturing reports and more than anything it’s a relief as anything negative at the wrong time can penetrate 1040SPX.  Tonights result will help the commodity linked stocks and the very late market push should extend until US ISM  comes into play.   China’s number became more important tonight because Japan’s PMI, (the first to be release) was very weak.

Once again 1040 and /or 1037 ES was tested, most are of the belief the more times it’s tested, the stronger the support.   Today, losses were regained quiet easily following ho-hum US data and fresh lows were averted.  Nevertheless, the thinking here is SPX1040 is just as vulnerable as ever due to the unrelenting negative data releases (which are accelerating) upping the chance of  ‘double dip’.  This includes ‘Micro’ negativity piling up, notably in tech land.

Picture remains the same, most are clearly adverse to stock picking and instead rely on the ETF’s/ ES to trade a technically driven market. 

Macro data driven!

If August’s market downfall was a macro driven event, today’s powerful action to the upside emphasises September will be no different in dependence on data.   Fortunately,  the relentless negative data gave way to improved data led by China PMI, US ISM  and consumer spending  the last few days.  It only takes a few day’s of data to change the prevailing sentiment away from ‘double dip’ speak.  We still have what may be 'determinative' numbers this week to sway the conversation of 'double dip vs. soft patch'

Coming into the trading day,  we discussed the previous days action in commodity linked hinting at better data...leaks or not.   China PMI continued the market’s late push from Tuesday right into much talked about here SPX-1065 (resistance last week) and with the US ISM on deck, (not only beating consensus, but better than July’s), the market had the ammunition to bust through resistance easily.    In discussing the market’s vulnerability at SPX 1040, we said if poor data came out at that specific level (wrong time) the market would likely be breaking down to this years lows no matter how many times it was support.   The opposite occurred today as we got excellent U.S data  right at resistance instead of bad data at support!.   Almost perfectly timed.    Still, as good as the data was,  it’s clearly a TSY  watch to the market direction.  Today was almost no different than Friday’s $TNX  up 5% day, but recall how fast this reversed this week.   Simply, this is the guide once again to where equities are headed in the short term.

Discussing the broad market and stocks/sectors is irrelevant as anything works on a broad based rally. Of course,  the commodity linked stocks from yesterday CLF,WLT  etc. led off the data,  everything else just follows the tape in sync with those most beat up in August (financials, tech) getting bid up on covering the most.  Also, high beta comes back as stocks here like NFLX, CRM  make NCH’s, even last M&A spec stocks here FTNT, NZ  made NCH”S.

What is relevant is noting the flat tape after 10am till close has many doubting this market move.  If data continues to improve into weeks close (retail..NFP#)..watch out Bears!.   The flat tape today makes people skeptical of the move, this is besides the overall daily skepticism that the market can’t hold onto anything as profit takers appear.  These negative sentiments today may just have positive implications this time for the market and thus more upside from here.   Market needs a couple days above SPX1065 for this to be 'Bull's home-court advantage'.  

..NFP /TSY on watch

If today’s follow through action seemed quiet and slow,  just look at a chart and the last 2 day sticks of 40SPX to understand the kick ass move.  The only thing quiet and slow is the slow and quiet burn of the Bear’s shorts as the market comes to 1091-1108 “R”.    We are handily in Bull’s court above 1065 for a 2nd day and above DJIM benchmark 20ma.    If NFP spoils the party look for dip buyers to come in at some stage (1075-1079) as Bull’s have the agenda above 1065 due to a sentiment shift.   Only a number in the vicinity of 100k private may be looked on as a pleasant surprise because it would come on the heels of a 90pt move since Tuesday’ FOMC minutes.   Let’s be a little realistic as much as it hurts in a rally mode.   Still, once again 10yr TSY was the precursor to today’s move and it remains the necessary tool to watch.  The TSY is up against a key technical (TNX 26.50/TSY 2.65) as is the equity market.

Noted yesterday was ‘skeptic view’ off the previous day’s rally and flatline most of the day leading to ‘positive implications’ for more market upside.   This is just more prevalent after today’s add-on 10pt move.   If more upside comes shortly, performance chaser may have no choice but join the party.  If you entered the trading on the belief of more upside coming into the day because of the ‘skepticism‘ angle ,  DJIM stocks noted yesterday flirting or /at NCH’s had some excellent day trade oppy’s, if you don’t hold some of them already.   The LOW-HIGH spreads offered some nice points on the day for NZ (19.93- 21.20), FTNT  (20.75-21.93), CRM (115.63-119.60), NFLX  (132.61-138.58).  

Have a good and safe long weekend…

DJIM #36 2010

Market’s mentality is simple.."What have you done for me lately, MAC'?”.   How else can you describe the turnaround action of 65pts SPX by Fridays highs.  The ‘lately’ is simply fresh ‘ Macro  data’ causing fast sentiment shift following a weekend of tough ‘double dip‘ talk in every major financial newspaper, post Jackson Hole rally.  

Some review of how we got to 1105SPX to pass to the Bear and their probable hogwash this weekend..or just the Bull, who missed the signs.

Let’s not fool ourselves as good as the macro driven rally of 4.7% SP Wed-Fri was, the initial instrumental catalyst was Jackson Hole and Bernanke last Friday.    Even though on Monday the market gave away Friday’s rally gains (due to media weekend focus noted above/TSY reversing) this was the ‘match‘ for better sentiment as Bernanke said , “no double dip‘ and eco’ data followed suit.   What still needed to be done was fix the ‘contentious’ FED worries.   These were cleared up on Tuesday with FOMC minutes as the last hour buying stomped on this rumour.   Now, the table was set for the ‘Macro driven’ rally that ensued for the next 3 days.  We highlighted the ‘solid’ China PMI’s…"Tonights result will help the commodity linked stocks and the very late market push should extend until US ISM  comes into play”.   The market pushed right into “R-1065” at ISM time and than it was off to the races on the much better than expected ISM data.   

Before Wednesday’s trade…
Following the ISM big initial push, the market flat lined all day as pessimism surrounded the rally and a flatline trade for the rest of the day.   At this point it was noted here..    ”What is relevant is noting the flat tape after 10am till close has many doubting this market move.  If data continues to improve into weeks close (retail..NFP#)..watch out Bears!.   The flat tape today makes people skeptical of the move, this is besides the overall daily skepticism that the market can’t hold onto anything as profit takers appear.  These negative sentiments today may just have positive implications this time for the market and thus more upside from here.   Market needs a couple days above SPX1065 for this to be 'Bull's home-court advantage..".    
 
Before Thursday’s trade…
“It only takes a few days of data to change the prevailing sentiment away from double dip speak.  We still have what may be 'determinative' numbers this week to sway the conversation of 'double dip vs. soft patch' .   We got more from retailers this day and thus, 10SPX points.

Coming into Friday‘s trade, we knew we (Bulls) had the agenda above 1065 as we had closed above it on consecutives days and also our 20ma benchmark.    Even an average NFP number would possibly only lead to a pullback before buy dippers would appear as sentiment had clearly shifted.   Fortunately, we got a number closer to vicinity of 100k private jobs (78k pace/3months now), which we thought would be a pleasant surprise for even more upside.   Of course, the TSY spiked well over 2.65% coinciding with NFP release, which we alerted would be next round of buying once cleared.   Simply,  there were too many caught of guard this week on their skeptic/ pessimistic heels and eventually (which was a NFP/TSY) would have no choice but join the party instead of suffering from Performance Anxiety -PA‘s (missing SPX1040 to 1090 to 1105) and become ‘Performance Chasers’.   The “PA’s were chasing all day,  premarket/opening bell off NFP, off 10pt to 1095 and at the close.

That’s the way the week unfolded and we could enjoy a weekend of Bear/Shorts conspiracy hogwash that the NFP was known to special people at 1040 this week!.  The rally event was Bernanke and macro driven starting with China PMI/US ISM...plain and simple!   Anyway, hopefully, we got you on the train before it left the station as we were not performance chasers come this Friday, but instead ‘profiteers’ at someone else’s expense.  Ahh..life of a Buccaneer trader in these machine driven trading days.  Most stocks hit their highs by 9:40am, looking at 'change from open’ instead of ‘change from previous close’ (exception GS got off the pinks sheets to trade) illustrates if you’re chasing at the open, you’d have little gains or no gains/or losses on individual equities by close.  

Not to say this rally can’t keep going/ underscore it or the data,  but a rest approaching 1108 April -August trendline  is as good as any to say your blessings after a monster move off what could have a death spiral at 1040 just days before.   Also,  if you’re returning from summer holidays next week wouldn’t you like this weeks gift to pay for your vacation time by taking some profits? Hmmm?

As this data becomes history till next months fresh numbers,  we’ll need something else (catalyst) to push higher.   Forecasts will not change after only a weeks data, so, we’re not out of the woods as Friday‘s weak Non-Manu' ISM shows.    Believe it not,  it could be Obama/White House becoming the next tailwind for the weeks ahead (Instead of the usual headwinds they’ve been to the market), as there really isn't anything on the horizon.   Yeah, maybe a stretch....but...

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