..wire watch

To put today’s trade in perspective, if you erase the last minute order balancing on the DJIA, the SP would have gained more points on the day, no not basis points!.  Also, if you erase MSFT gain portion on the indicies and you are left with a real yawner of a day.  

Still, some underlying positives allow the Shadowlist to outperform (intraday fresh highs for TIF CRM N IPGP NFLX  WTW EBS ), as small caps (RUT) outperformed for a second straight day, plus, commodities follow through has allowed the market to slowly find its footing off the April gap for some risk on trading as noted early in the week.  

In all, back and forth action remains with the equity market underperforming the EURO/USD, which has reversed from the 1.39 to an early high of 1.42 before an ‘hourly ‘wire  hit from the Eurozone (Greece, todays flavour) brought it down.  You'd expect some de-risking tomorrow into the holiday long weekend, but you'd need traders to be at their desks!...(Euro trades lower most Friday P.M's).

Have a good long one!

DJIM #22 2011

The only weekend news, is good ‘risk on’ news.  A WSJ article reports Germany will drop its push for a Greek restructuring in order to facilitate a new aid package for Greece.  Euro up, USD down, commodities up.  The initial reaction will likely be all overnight ES action with subdued follow through in regular market hours.  Hence, be careful chasing the bus as the primary focus this week will likely switch to Global eco’ data (PMI’s) to provide some clarity as to the scope of the economic slowdown.

US data,

May 31st (S&P CaseShiller Home Price Index, Chicago Purchasing Manager, Consumer Confidence, Dallas Fed. Manf. Activity

June 1st ,(MBA Mortgage Applications, Challenger Job Cuts, ADP Employment Change, Construction Spending, ISM Manufacturing, ISM Prices Paid, Domestic Vehicle Sales, Total Vehicle Sales);

June 2^nd, (Initial Jobless Claims, Nonfarm Productivity, Factor Orders, ICSC Chain Store Sales)

June 3^rd,(Average Hourly Earnings, All Weekly Hours, Change in Private/Nonfarm Payrols, Unemployment Rate, ISM Non-Manf.)

All in , day 4 of SP gains is in the cards since ‘zone footing’ played itself out with Euro now pushing 1.43 from 1.39 and SP now coming into May channel top ‘R” at 1348.

Japan..tide goes out

A slew of eco data knocked the US market off it’s lofty gap open all the way back to SP1334, but a late 45minute flourish made for an impressive comeback.  This spree had a lot of Bears complaining (manipulation cited again) as to how possibly a market can run off such disappointing data.  In some ways, they are right as it was mostly ES driven and probably a function of window dressing as well to close off the worst month since August’10.   But, if there is an underlying reason besides the Greek overnight bailout news, it’s the fact Japan  showed remarkable momentum in its recovery when they issued ‘IP’ manufacturing guidance.  This could be a better eco data point indicator to growth for the summer and second half of the year. This could dispel all the recent ‘growth’ fears and might be why all “Global’ markets rallied together seeing this as a leading indicator.

In all, it comes to a technical picture to tell the truth as US markets are now hovering near the May channel top and over 20ma.  If this Japan story gets some steam and/or some US eco data surprises later this week, the markets may penetrate this ‘R ‘for good.  Still, unless investors see hope and buy individual stocks, we’ll stay in a lateral trading formation.  All in, a more positive bias should emerge after today.

Steep...Slow bleed

Despite Monday’s overnight gap exuberance based on Greece bailout reports, we entered the week highlighting …  “..be careful chasing the bus as the primary focus this week will likely switch to Global eco’ data (PMI’s) to provide some clarity as to the scope of the economic slowdown”.  Well, 48hrs later….today's equity scoreboard sums up the end result of the eco’ data provided so far for the week….SP down 30.65 to 1,314.55, DJIA down 279.65 to 12,290, NASDAQ  down 66.11 to 2,769, Russell down 26.90 to 821.   

So, yes,  it can be concluded Tuesday’s rally was ..”mostly ES driven and probably a function of window dressing as well to close off the worst month since August’10”.

Simply, eco’ data was the downside risk for the market more than in recent months in our view and hence we layed out the schedule for the week.  As it turns out, today’s action described by words like carnage, demolished, steep, worst day since August with SPX falling intraday from 1345 to April’s gap  1314 is a function of the data.   Any positive bias emerging from previous days Greece news, Japan IP numbers was squashed by Global PMI’s…..China’s, Europe, UK PMI’s , (US ADP tossed in ) followed by US ISM  in early market hours.

In all, May channel top  once again provided resistance.  After twice, including last week’s ‘Footing Zone' in the April gap as a possible level of support and hence bounce oppy’, we can’t say it for a third time for the market.   Reason, today’s eco' data will push potential buyers back on their heels as it hits every morning paper.  It doesn’t mean all hell is going to break loose, but SP1295-1300 is a likely necessary visitation level in the near future extending the lateral trading range to create capitulation of sorts.  A bottom is near, today’s market carnage was a necessity for it to be closer at hand.

..on their hands

After heavy scrutinizing of disappointing eco data by all involved in the markets, it is not surprising today was an uneventful market day.  Hence, it’s not surprising the April gap 1313-1319 that provided support and led to 2 bounces in May was easily penetrated to a low of SPX ~1305 as buyers show a lack of conviction to step up this time.  Luckily, shorts are still gun shy to press heavily and long holders are not panicking into selling individual stocks today.  Most of the action today was fast traders using minute by minute headlines out of Europe to flip the ES/SPY, although it’s really secondary what happens in Europe as of now to most investors after this week’s eco’ shock.

On deck is the NFP#, a poor number should be priced into the markets and the # may only matter some if it surprises big to the upside.  The markets eyes probably now turn to Bernanke and Trichet speak next week before anything decisive occurs, still SP1295 seems just like a matter of time ahead of their speeches.

DJIM #23 2011

A month (May) long slow bleed became infectious as insult to injury carried into June. You can’t sum up the ‘insult’ any better than in the abrupt eco’ data slide, notably in Global PMI’s showing a broadening slowdown compounded by a terrible labour report.  A 3.7% SP decline from peak (Tuesday) to trough (low on Fri.)

A ray of hope in the doom and gloom week is the Japan IP guidance, but for now the potential big boost down the line is not enough for the startled marketplace.   A quicker than expected reversal will definitely play a role in global #’s, but commodities (oil first of all) need to continue to stabilize so consumer spending comes back(US labour market = consumption ).  Despite the doom and gloom shock , this is likely the recent temporary abnormal factors playing themselves out in Global numbers, but again, the labour mkt/consumer is a fresh risk here after this week’s figures.

Unless this week’s data forces gov’t/feds hands to ‘fix and act’, (how is unimaginable) and ends up serving as a positive catalyst, we as traders are in no man’s land as corporate EPS reports will only start to trickle in this month, plus we’ll have no substantial eco data for a month to rebut this week’s numbers. We had JOYG (eps), big bankers, FDX give hope at conferences/shows.

One big hold up (Greece) and this week’s re-bailout news is likely an overhang almost removed and thus a positive, but we still have debt ceiling unresolved and a few other factors to get around. Any signs of stabilization in Europe will improve market sentiment.

As for Friday’s trade, ADP# related carnage on Wednesday quickly slashed views to low's of 75-100k (GS and others) vs. the overall consensus forecast of 175k by Friday morning.  The market had a ‘poor’ number (75-100k) baked in most likely, but the horrific 54k best result would have been some capitulation for the market. Instead, damage was done in ES/SPY premarket with most single stocks and many sectors hanging in real well in the morning as market resiliency is still present. There was actually more weakness late in the afternoon in single stocks, which eventually led to the market giving up the intraday reversal and closing at lows of day. 

DJIM has avoided providing a daily Shadowlist component update since becoming cautious on the market at the start of May.  As end of May sector breakdown below illustrates there was no need to as de-risking has turned into 5 consecutive weeks of declines.  Hopefully, we’ll start up providing such soon again.  Note, related to this was Thursday’s strong action in China Internets, which we battled with including in the Journal. Well as of late Friday’s reversal beatings in SINA, BIDU,QIHU,YOKU indicates it was the right decision not to take one day action very seriously in any market component and begin the Shadowlist breakdown again.

As noted after Thursday’s trade, market turns to focus to Bernanke (Tues.pm) and a lesser eye on Trichet later in the week.  A re-widening of monetary policy between the two should be coming back now, which has been best for the markets.

Buyers strike..

Last week speculation here was SP1295-1300 would be visited prior to Bernanke’s address.  It has come to fruition and more as a buyers strike  has set in allowing for an easy trip to 1284SP equalling approximately a 7% decline peak to trough and YTD return just over 2%.

Today was almost an identical trading pattern to Friday’s,(early morning weakness, short covering bounce into lunch and a steep fall late in the afternoon).  This is proof of a buyers strike as the market weakens after the initial short covering fades and lack of buyers doesn’t allow for follow through.  This lack of buyers is the clear obstacle for the market preventing a decent reversal bounce, but it has played straight into the Bernanke comments, which may be a sentiment driver to ease longs concerns and scare shorts enough prior to create some upside action.  How long it lasts afterwards is anyone’s guess at this point, but a short relief rally is likely in sight if buyers start picking at beat up groups ie. Banks to get things going.

No Bernanke bullets..

Market rallied for most of the day (2pm) as high as 10 SP pts, but as pointed out in the lead to the trading day, rallies fade steeply once short covering dissipates amid a buyers strike. Today was no different, yet a little different due to the selling off starting into an event (Bernanke). As noted here since last Tuesday’s open rally and now ~60 SPX pts lower…”don’t chase the bus” …and that was Journal lead trying to invoke the “buyers strike “ theme out there this week.

End result today, SP500 off ~1.2, DJIA off 19.15pts, NAZZ -1pt to 2,701.56, R2K +2.23pts.  As discussed recently it’s unimaginable what the gov’t/fed can do immediately (premature anyway).  The market although not anticipating QE3 acted like it by starting to sell off after 2pm and picking steam as the speech hit the wires by 3:45.  Nothing new coming soon was all Bernanke said and considering the market is not anticipating Q3 (maybe 10%), the reaction is counter that market sentiment.   The market took the absence of ‘transitory’ in speech as something more concerning, but he did blame ‘Japan’ enough (which is the same)and didn’t give initiative options as to what they may do if it isn’t transitory. This is likely the market disappointment today as policy options(bullets) were not given.   All in, a buyers strike result again, yet single stocks acted a tad better, including during sell off indicating fast traders dictating market through ES/SPY moves.  The market needs a good close to signal any chance of an end to the buyers strike.

Update on Wednesday, June 8, 2011 at 10:04AM by Demi/ YourPersonalTrader

March gap 1279-1281 hit, was a pivotal point before...could be instrumental for a reversal.

6 and counting..

Unfortunately, the trends noted all week remain in place.

There is really nothing material (except techincal below) to add as SPX YTD gains dwindle to 1.7% with a 6th consecutive down day on its way to 6 consecutive losing weeks!. 

The Fukishima low of 1249 is looking more and more likely down the road, but for now (as per intraday follow up), SPX March gap of 1279-1281 is a level to look at in capping the most recent downward spiral.

Underlying trends persist

Although, the 6-day SP losing streak ended, the highly visible buyers strike continues despite an 18-SP handle upside move to today’s peak in the last 24 hrs. The possible 6 –week SP consecutive losing streak is alive and well.  The ‘strike’ stands out in another weak close and low volume that seems to be elevated in ETF’s vs./ comparatively to stocks.  Also, the action was not broad with tech lagging from the opening bell.

Most Shadowlist plays were ~ +1 to -1% with only a few exceptions like Ag’s moving more to the upside off USDA/WSADE #’s (positive for machinery stocks, TITN nice EPS again, AGCO etc. and SINA down more on the downside.  Considering the market was ripe for some relief, today’s action was nothing more than the usual first layer of some quick short covering with little conviction buying follow through.  This is not surprising, the market is ‘no man’s land’ as discussed in the beginning of the week because of a lack corporate news or eco’ data to give investors any further insight on the economy.  At least today’s data was better than feared and if it continues to come in this way, it may be enough for investors to nibble at these levels.  Any signs of a debt ceiling hike resolution coming sooner than expected may also be enough for investors to step up in the next few weeks. All in, unless a catalyst shock occurs for either side, the same market trends will persist until June 22 FOMC.

Update on Friday, June 10, 2011 at 10:14AM by Demi/ YourPersonalTrader

SPX 1275 = Feb/March decline