'Club Med'

Judging by the flatline SP futures overnight >1090, the last thing on anyone’s mind was the possibility of chaos that ensued immediately after the opening bell.    It’s almost inexplicable to understand that in a wired world where trading is literally 24hrs a day,  you’d have no insight from the futures as to what’s ahead for the day, especially signals to a 3% down day.   Today’s was one of those days as seemingly all were caught off guard as no downward gap was in play.   Instead a straight trajectory down of >30SPX points, ~3% losses all around.   You’d only have to tune in on CNBC from 9:30am to tonight to see the sweat as all talk was about the damage being done to all indexes, gold etc by the “PIIGS”

It was spooky in the markets, to us, the spookiness was to see our bolded warning come to fruition immediately and to hear comparisons of Lehman /BSC prevail all day long.   So, now in less than a few hours, we are knee deep in the PIIGS mud pit, everything changes as this story takes center stage with every trader/investor.   You know what? ..we’ll use “Club Med”  instead of PIIGS, being bacon loving Canadians, eh.

Considering so many were caught off guard and so many more coming home tonight to these headlines, we would have to expect more selling ahead as this story is not a bad eco’ report or a bad ‘big name’ earnings report, this is completely different to an investors sensitive psyche’.   Basically, its time to sit back and wait to see how this unwinds.   Unless, a magic wand is used,  we have no intentions to re-position long with all the technical damage done.   Even, if this is backstopped by EU in short time from becoming a long standing problem hitting all over the place, we still have to accept we are closer to a 10% correction than anything else.   In our view,  let’s get this over with (10% correction), capitulation occuring, pessimism hitting fresh highs and hope this problem is backstopped at around the same time.   This will present excellent opportunities, many better than March to October’ 09, especially if US earnings, recovery begin to matter.  

Without looking, we probably broke down back below from the trendline going back to highs of October 07 when we got odour of a crisis.  Coincidence or not?.   Anyway, until the tide cleans up the beach’s at “Club Med” ..Greece, Port’ Spain,  call this a short vacation time.

..handcuffed..

Today was nothing, but a disappointment as the market finished at a new closing low for 2010.  Maybe some would like to think it was just a Super Bowl hangover as volume was tepid following a big volume day on Friday.  But, in reality it just proved Friday’s reversal was just noise over expectation of calming waters in the Mediterranean with one of the Club Meds…“if this was just a hard ETF short cover, we won’t have a Monday follow through”.   If you use the shadow list as a guide, you’ll see,  excluding some banks - brokers on Friday,  most stocks followed hardly moved showing a SPY and other ETF ‘s can’t be trusted no matter how giant the volume in them.  Money needs to go into stocks, not just ETF’s for capitulation. Also, pessimism may need to worsen for capitulation to occur.   Today, the only group to move Friday (Banks- brokers) had the biggest hangover on the market. 

We got no follow- through and a big negative was we couldn’t push over or close above 1071 curtailing odds we bottomed out at the 200EMA.  The fade job in the last hour was disappointing, shorts are getting more confident pressing new positions on any decent upticks and buyers will remain tentative to chase and give needed momentum.   Simply,  >1071 close is needed for a positive tone to possibly emerge.  Of course, tomorrow, we could get fresh Greece bailout rumors and market once again may rally.  Handcuffed market.

'Whiteout' day...

Market is seemingly ahead of the calendar and the upcoming 3 day holiday!. Today had all the characteristics of a holiday session, a complete “Whiteout” just like the NE.  There is no color from this action,  just a technical trade in effect with 1071 being a roadblock.   As we said in last Journal, the Greece angle is looking more and more to be priced into the market after today.   Most likely, we’re stuck in a narrow range 1055-1071 until some data on the eco’ or corporate front to get a read on direction and which, if any, sectors are tradeable.  

We’d watch earnings plays now, if dealing with the fluctuations of the USD/ EURO and the commodity linked stocks gives you whiplash.  As we pointed out reactions are better to earnings, especially to those stocks that were oversold in the recent mess.  Off our list, EQIX  is one tonight that may reverse its recent trend off its inline numbers, even if it sold off more AMC.  MICC , we’ve added today as a earning play to our list,  HAR  noted on Tuesday had a nice follow up day.   Also, China related stocks might be turning in anticipation of next week being a holiday..blackout period for data.  

DJIM #7 2010

A whipsaw week finshed as it opened.  The market continued it’s up and down routine right to the end as China ‘RRR’ so-called surprise headline hit Friday premarket sending the SPX to low 1060’s once again.   As pointed out premarket, we didn’t see it as a surprise feeling any negative reaction would be exaggerated.  The fear mongers were out early, but rationality set in as the day progressed and CNBC began to have guests on that believed the same thing we did and the market started to rally back on the heels of tech.    We’ve been saying we need a meaningful close above 1071 and now we have back to back ones that should change the tone to a more technial positive one for the short term.   Also, finally, we had some dip buying come back to the market.  Some buying was probably generated by better than expected eco’ data (Jobless claims, Retail).  Last week was pretty quiet on US eco’ data,  despite the shortened week ahead, it will be busier and important as we get fresh looks at February data.

All eyes were on commodity linked stocks last week,  but tech ($SOX) quietly came in the back door and duplicated it’s Thursday move on Friday as some money started to rotate into them from commods’.   As pointed out,  we think this is anticipation of some earnings reports in the upcoming week from some big names.   Market might be anticipating more estimate revisions because of the reports coming up, giving potential for a bounce in the sector.

On the topic of earnings and tech many names from February released reports (mostly January Q end) are trading well.  Names this Q include, VECO  NETL DLB  and cheaper names like SFLY APKT MKSI  and stocks in other groups like HAR CMI EMS  have also had good reactions.  

M&A activity in Ag’ space this weekend may provide a bid to these linked stocks.

Market is still on a fog on as it tries to look at something it can’t see clearly..Greece, China.  These are market stresses, but, if the market concentrates some more on what’s happening here, hopefully with the help of some eco‘ data this week,  it has a chance to stay away from recent lows.   Importantly,  there are some open spots in the fog to trade day to day, eg. commodity linked stocks or possibly some more tech ahead.   Either way, recent earning plays are providing a pretty good place to trade.

"Home Alone"

Isn’t it amazing what the US market can do when left home alone?.  Simply..with China "Eye of the Tiger” on holidays this week not peeking over our shoulder and us not over theirs…and Greece acting as it should ..a “Club Med” vacation spot,  the US market is running the house!

Today, the house was very quiet after partying for days as it should, a sluggish, choppy trade (although still firm breadth) that seems to take most of it’s cues from FX action.   Earnings were led by our alerted WFMI, which helped the staples lead the SP500.  Just on Tuesday, a strong Euro gave a bump to stocks,  today an early sell off occurred as the Euro sank and USD strengthened, but in the end the  market held up well.   The signals sent from FX continue to be mixed,  today even the strong USD didn’t hurt commodity linked stocks or the market end of day.  

It would be advantageous to break 1100 soon, we failed on a few attempts today.  If this failure continues it becomes a  ‘psyche’ thing and nervous longs will start to think this rally is petering out and begin to take more profits.   Also,  if this level to 1005 is not broken through,  it would signal a technical failure and odds would grow to the possibility of a 1040's retest.   *Next week,  the Chinese holidays conclude and Greece has some important dates, including a possible bond offering to have a negative effect on the markets.  The Chinese RRR announcement came out after their markets close and their market needs to react and the reaction will likely be negative.    So, as we said lighten those commodity positions and any China positions, especially before they begin to trade.

Conviction buying is needed and tomorrow the Joblesss claims will be eyed closely as longs need something extra at this point.

AMC, Tech earnings were inline and management comments are still inline positive, but nothing ground breaking.  The trade was into these mid-week reports as noted last week,  there is nothing new to propel tech higher,  it should trade with the broad market tape.

Shadowlist

Shadowlist by sector money flow/ rotation to follow. (visit site).  Most Q earnings fall within tech.

LINK sent to members

DJIM #8 2010

After digesting the FED discount rate hike on what was actually timid selling, the overblown news was bought up and new high of 1112 on this rally was reached.  The ability of the market lately to absorb negative news flow and go on was prevalent once again. The market was able to take the hike in stride as a probability discussed.  Simply, the FED is on hold and Bernanke’s 2 day testimony this week will reinforce this and the market sooner than later will have to go and realize it’s premature to think a hike in 2010.   What we’ve been more concerned about last week is the reaction in China to their Banks RRR raise after their market re-opens.   But, as we pointed out late Friday, the fact we’ve been able to shrug off the US hike and also rally on the week might temper an initial negative knee jerk reaction.   This seems to be the case tonight as Shang trades flat.   If this mild reaction continues this week, it will be a positive catalyst.

Bernanke’s testimony, China and a very likely multi billion bond offering in Greece will be the catalysts this week.

...could have been worse...

The DOW may have only eked out a triple point loss by .97 with the broad market off just over 1%, but it really looked worse under the sheets.  Major catalyst was the disappointing US confidence number, the lowest since April 2009 as the unemployment picture is getting tiresome, but there was more to the awful market sentiment…..

Tech- BRCD CTV earnings were a huge disappointment, add some Samsung overseas comments about worries over a chip bubble, moving away from their bullish outlook.  $SOX, we noted its battle at 50ma, today it lost as it closed 3% down.  These Samsung comments were blown off by exec’s at some major US companies, but it didn’t help by close.

Financials were hit as a banking report headlines hit that bank failures are draining the FDIC fund.  This was about same time as Consumer number.

Weak Euro zone numbers from Germany hurt, stalling recovery talk is starting in the area.  Also our notes last week about China are beginning to get whispers.  The Shang hasn’t tried to play catch up at all to the US markets rally and this is probably showing signs they are not buying..restocking.   Some are looking at the action of copper as a sign (down 3% midday),  we’ll just wait for noise about this issue to gain momentum one way or another in days to come as its integral to the health of commodity linked stocks and China stocks etc..

Eyes on Bernanke testimony now,  there was some confusion in the market today on a SFP program and he’ll need to clear this up as it probably hurt the market as well.  Anyways, lots of confusion all of a sudden and a bearish reversal day technically.   Also, Greece is still in the picture and the offering may be delayed and US investors are not interested in their debt and this may lead to questions of it’s success or not if /when the new debt comes.   Stay light or out as we proposed late last week into this weeks trading.  A few too many headwinds, including technically to look at buying individual stocks at 9ema due to a chance of a test of 1085 (about 20ma).

...need a tie-breaker!

.. like a hockey shoot-out to break this range...

Today, we were thinking when was the last time the market had any good news?.   Just like today with a disappointing jobless claims #/ durable goods, we seem to have only headwinds..eco’ data, political..etc for weeks now.  The last ‘tailwind’ was a holiday (China New Years) of all things to let this market recoup some of the downside as US markets literally played home alone.   

So, really, considering all the negativity we’ve faced,  it’s not all that bad that we’re around SPX1100 as the week comes to a close.   We talked about a bearish reversal and a chance at 20ma earlier in the week and after one up day, today the market smacked the 20ma today and reversed not violating the 1085.   Recall, the 20ma area is of importance as this was the mark all the way up in 2009 rally.   As the fact that there is no conviction buying to push out and close out of this now 7 day range, today's consolation prize is selling was not aggressive and so no conviction is on the other side to breakdown.  Both sides lack confidence.  Longs are jittery and shorts are pretty quick to cover as seen today.  

Unfortunately, we are getting lower highs all week, but today’s rebound may inspire overseas markets and we can change the lower high closes theme tomorrow with some follow through.   A ‘tailwind’ tomorrow might be the snowstorm as trading desks will be quiet allowing for some monkey retail business and end of month window dressing.   Yep, we’re getting desperate for a ‘catalyst’ being meteorologists.  This market is simply an ETF trade right now, which is great for flippers, but for traders like us looking for a trend, momentum in either a group or individual stock,  it’s almost non-existent at this moment.

...upside risk coming back slowly

After breaking the string of lower highs closes on Friday,  the market woke up to be powered out of the gate by a string of M&A activity worth about 50bln  + more Greece aid package noise to close at flush levels of 1115 SPX, we discussed last week.   This is just above the 7 day recent range and if a good ‘breadth ‘ day is indication, as many times it is for a few days more,  the risk is upside and those conviction buyers may have reason to step off the sidelines as the shorts will keep their distance.  What’s good about the ‘ breadth’ is even the big momo laggards got in the action..AAPL, AMZN.    This appetite for techs helped propel the SOX over the 50ma after trying unsuccessfully last week. 

Of course,  the financials are always the disconnect from the market tape it seems.  Last week they outperformed the tape,  today they stunk the joint out.  Well, we’ve learned the past 6 months or so that GS and the boys are not greatest barometer of the tape, so it’s no big deal.    If we follow our shadowlist names and set it up as we did in our last update, you know where the money flow is going and therefore what is the trade.   We can see by the example below of where some of the flow was today and it was into our Q earnings plays.  Some names noted in February off earnings enjoyed a NCH day…ie. WFMI  MICC DLB NFLX PMTC