"It's all in the details"

How’s that for ‘Upside Risk’ shorts?.   We told you the weekend leaks were one big risk!.   All we could say is Mr. (yes, it’s Mr. now), not whipping boy, Geithner, why did you ever bother with the sketchy February 10th - 4 point plan,  if  you had no specifics to revive capital????.   It’s all in the details..details !.    That day the SPX closed at 827,  today we surged through the 50ma and closed well above this 800 mark.   This close is a big positive and the Bulls finally should have the upper hand going forward.  On a technical view,  the next big TA levels not until the upper 800’s.   

The premise since late last week was that shorts were leaving the market to figure itself out by not taking new positions.. "shorts are not lining up new positions due to upside risk to news".   Those are the smart shorts, the ones still helping the market go higher by short covering are not so smart looking today.   Last few days as the market slid slowly back under 770,  we believed this was just a healthy tired action as recent market gains were being digested and not relinquished …“The market will do what it needs to do!.    At this point, there are still upside risks as we come into month/Q end for the shorts and that may keep the market from a major pullback and instead break the 800 hurdle later next week….”.  Without going into the small print of the programs introduced (we‘ll send you a PDF file if requested),  we also had positives in the Housing data and more M&A activity as the biggest deal came along since 2006 in the oil sector.   Can you believe that ?.   The good ole days are back of M&A Mondays;).    Okay,  maybe that’s a stretch,  but if you add up a few things this rally is different from all the others we’ve had since all the bailout rallies that failed.    Why?.    A few differences is now we have M&A activity on a weekly basis,  Oil running to 4 mth highs and sentiment is much better.  Confidence is emerging,  but the confidence in your politicians is going to be a possible cloud if they keep sticking their noses into the wallets of Wall Street!. ( a 2:50pm headline helped the rally…Senate could delay debate on its bonus legislation until next month to give more time for consideration).   
In the morning to make the gap work and extend,  we got what we posted premarket as a 'key ' to the plan …White House National Economic Council Director Lawrence Summers said that investors in the Public-Private Investment Program won't be subject to the compensation limits  applied to banks rescued by the government.   Once this headline hit CNBC,  the market sighed in relief and started its move to tackle with 800.

What’s the next big catalyst?.  You got a sniff of it late today and that is if bankers- brokers raise capital through private equity deals to exit the TARP!   This is amost a clincher and what will drive this market closer to SPX 1000.    Did we say that..1000?..lol.   We'd definitely buy the market the day we hear news like this.   GS  helped this rally late because the WSJ reported that Goldman was considering selling part of its stake in China's ICBC and would use the proceeds to pay back the TARP.

Into the trading day, we noted Financials will again be in focus if the Geithner plan is liked by the market.  Did it ever (+18% financials)!  The move recently has been great in this group and it's arms,  but there is a lot of upside left, we're only back to February lows.    Long term money flow,  if believing into this market story have a lot of room to maneuver into and profit.   The only thing is now to let some settling take place.   So, while this likely occurs tomorrow,  we'll continue to focus on the commodity, energy trade from last week.   The stalwart (tech) of 2009 is back after a short hiatus and is tradeable once again.

We have more legs to this rally,  we have the upside risk due to events unfolding in respect to, "...with Q end coming it is the perfect time seemingly to get the hedgies to prop up their books".   This is of course now more than ever relates to 'Whales' doing the same (MF`s Institutions).   For potential vibrations in the market this week,  watch out for DC and budget draft resolutions.  As we know, lawmakers can dampen things pretty quickly, but view any negative items as an opportunity to buy on the pullback.

underlying bid prevailing..

Underlying bid prevails today as the bigger fish go fishing...

Just some scattered trading thoughts,  mostly due to fact many aspects of this market/ plays remain the same since late last week.

Two characteristics of the market still showing,

1) Shorts are NOT starting fresh shorts due to upside risk of news.  Ones that pressed with downside were left dazed and confused.  Also we still feel the Hedgies/ Institutions, MF’s pensions (whales) are chasing equities to pretty up their books month end/ Q end.

2) We kept mentioning the underlying bid providing support yesterday, we thought and got it in the morning as we extended higher (helped by durables, housing) after not such a nice close on Tuesday.  We alerted in the afternoon, we were aware of Whale buying the Industrials in the morning (this spurred by eco‘ data), the idea was they would come into the closing broadly.   Remember, this is mostly the time whales buy,  this is why last 30 minutes to a close is such an important ingredient to the health of the market.    Besides, we didn’t think the low volume downside to under 800 or the Treasury auction news was all that important.   Other news providing some headwinds was Trsy asking for authority to seize hedge funds and worries they won't just let banks leave the TARP in near-term.    Almost to the minute of alert,  we got a V-shaped bounce started which scurried out any shorts that pressed into this downside move thinking this rally was broken.     Again, the underlying bid is there for now.   

Remember,  instead of scurrying around the find a stock that may work during/if we get a big move such as this 140DJIA +reversal in minutes,  just go with SPY/SSO or even better go to JPM/GS  to get the most out of a move.    We’re having some trouble getting through  ~820SPX area,   but this kind of close will make everyone think twice..the bulls (encouraged ,confidence) and bears (losing faith, jittery).    This is looking like more digestion above 800 before a move higher, instead of indigestion.  A meaningful break of 820 very possible tomorrow. *eco data tomorow morning.

Sec's

We had short covering early in the steels , again X  leading the way.   Considering,  we are about a week into the inflation linked equity trade,  we succumed to quite a bit of profit taking as the broad market sold off.    Always remember,  if your stock/sec has been fastest to the upside,  it will be one of the fastest down as the broad market turns.    This trade will have hiccups, so as we answered in the forum last week, everything is still a trade, not an investment, so take profits along the way.   We've all learned the past 12+months this a traders market.    As far tech/Naz related stocks,  we had SMH $SOX  breakout after the opening bell,  but it got taken down with the tape.    $SOX,  we'd like this 230 broken convincingly to attract more interest,  including ours to go into the high beta's stocks.

More tailwinds than headwinds...simple for now.

DJIM #13 2009

On the back of this rally,  we've outlined consistently the tailwinds are outweighing the headwinds and so let the beat go in and trade with a bullish bias.   Unfortunately,  this weekend we've got the one potential headwind (D.C!).. "Unfortunately, this is a D.C sideshow the market has to deal with on a daily basis now".    Instead of waking up to continued M&A activity on Monday to keep the market rolling,  we've got that D.C cloud over the global markets as they talk tough with GM/Chrysler.   In reality this item goes hand in hand with the things were ' tougher' in March banker comments from late Friday (still ,NTRS BAC said there are tentative signs of bottom in economy during meeting but this not really reported) and thus the 2-4% downside globally.   SPX held 790 overnight.   At this juncture in the rally,  we think this reaction is more of an excuse to take profits.   This exaggerated move might may turn out to be a buying on the dip opportunity.   If last weeks underlying bid/ support takes advantage drops is any indication,  the market should shrug this off.      Nevertheless,  we'll avoid the initial sell off opportunity to buy into and just wait for more headlines.      This is going to be a rich newsflow week and we expect volatility intraday Monday through Friday!.     After taking advantage of the inflation- linked trade last week,  we're in no hurry to add early this week and instead turn our focus on corporate earnings.    After all the positive financial newflow and 'hints' of stabilizing economic data it all winds into the upcoming corporate earnings season.    All the momentum and good breadth seen is at risk  as all eyes are on 1Q reporting season.

Besides,  the wildcard play on commodity equities here,  we have stocks like EBS MYGN  that should withstand broad selling as their sec's are usually quite immune.   We also added STP  in hope the solar 1 - day frenzy has any legs,  we said this China paper will do nothing for U.S based Solar co's on the revenue front, plus the budget is not so great so far.   Still we went with the STP  ADR despite all the negatives,  even a 'short this play' call from FBR.     We think it acted well late despite this and started a speculative position,  maybe traders will look for a sector to manipulate higher.    As we said following the Treasury buy news,  we are turning to individual stocks- sec`s away from the market driven technical SPX /SPY trade.    We are hoping, like the commodities,  some niches will emerge and not trade with the broad market on a daily basis.

Sloppy day!

That is the only way to describe today’s trade…Sloppy!.    Considering trading is a lot about preparation, our premkt lead was the global hints of stabilization in eco’ data posted may carry through to here.   Fortunately,  U.S data was good enough (guess you could see bright spots if you look hard enough) to lift us over the important level of the 50ma at 791SPX early on.      Still,  this seemed like slop trading as the market here was lagging the overnight markets and the FTSE  which was climbing and over 4% near close while we limped along.    We thought this divergence had a reason to narrow and posted we could see our indices climb after the London close.    Well,  the indices did come from the shadows with the SPX climbing nearly 15pts to highs of the day (810 up 3%) in the next few hours,  but the ‘scattered’ action we alluded to in the morning really had continued into 3pm.    Something was array,  today had a feeling of late summer trading.   The biggest problem was despite the $USD getting whacked,  the commodity linked equities were not participating on a lower $USD.     Again, a divergence in an unusual trading day and so the last hour sell off was not that big of a surprise as there were many missing links.    There was no real buying as in conviction to get to 3% gain on the SPX,  this type of activity usually ends bad as in gains being pared by close or overnight.    Only the financials really performed,  but that just looked like more short covering in the works.      We’ll probably see an early continuation down tomorrow with the 50ma an important level to hold by tomorrow’s close.    Also,  did you see the Super-Caps ….MSFT up 6%,  what’s that all about???…Who cares!!...Simply,  things didn’t make sense today and the volatility we prepped to start the week came and we closed back down to SPX 797. 

Sec’s/ Stocks closely followed in brief…

Shippers , ..."AMC,   TBSI  announced a pretty decent report and stock is jumping up in AH trading.   We'd again look for GNK as a sympathy trade in the early morning if this AMC sentiment holds."   In the premkt,  you could see this was not going to materialize as only TBSI was gapping (not the usual action when these can potentially run during day).   Still, being prepped is key, at least you are there if a trading opp’ occurs.     What we got instead was another broken down sector (Solars ) getting a lift of a Jefferies note on CSIQ.    This lifted all the cheapie solars,  we loved and traded hard in the past, CSIQ, JASO, LDK.  We’ll take it, but STP  was already in the process of making a nice pattern  (see chart and caution comments midday ) and exploded from it nicely.    We would have preferred to let it ride by itself, but it seems many firms are willing to take this sector for a ride into earnings.    You could see this by the endless notes in Briefing.com to remind readers of past runs into earnings.    Again,  the trading environment is for traders,  if you accumulated STP in the $10’s, 11’s in the past few days take your gift in the mid $12’s.   That’s 10-20% in a few days and truly a gift when stocks pop 15-20% on a lousy upgrade.     Another stock mentioned constantly the past week was MYGN  and it hit new highs early.   The worst part of this late decline is it took down one of the few outperformers the last few days with it. 

USDA prelim #'s did not attract any interest for the Ag’s- chem’s ,  the sector just rode the tide of the lagging commodity equities.     This also was a divergence as the price of grains were propelled by the planting review.    We think this muted reaction may change soon, but energy links are acting terrible and need to pick up to help out.

We’ll watch for eco’ catalysts tomorrow (ISM etc.),  hopefully the G20 doesn’t cause a lockdown on the markets as the city of London is already experiencing.

Positive tone...

Despite a negative close carryover aided by a terrible ADP#,  which lead to a downside gap,  we alerted the ISM # / JPM bond offering might lead to a good tone from here.   The heads up didn‘t disappoint and gradually came to fruition as we slowly moved higher, a desperate attempt to replicate the 3pm action from the previous day by the shorts fizzled.    In fact, we also managed to take out yesterday's high and closed above it.    You do have a sense that this market is hungry for good news since the bad news (ADP) just can't seem to shake it down.   Tomorrow we have this meeting of directors at the financial accounting standards board, which may issue a relaxed mark-to-market rules  for credit securities.   This is evidenced by the strong rally in XLF, and most financial securities in general as the short covering rolls on.   As the saying goes, financials go up, so goes the market.    In the broad market, almost everything enjoyed a healthy day.    Just like we thought yesterdays close may lead to a lower open, we think today's close will lead to a higher open tomorrow.

We know this market is capable of going up and that's why we've been saying use some of the dips to get shadowlisted names in the 'working' sectors.   The trend, as we have been saying for the past few days, is up.   It just pays to go long as oppose to any other strategy.   The commodity group had a pretty decent day, helped largely by many steel and metal stocks rebounding.   We’d concentrate on CLF  X  as always.   Oil stocks, on the other hand, seem to lag the rest of the commodity group.   At this point, we feel oil group will catch up to the rest of the market, eventually.   Being in OIH  is just the easiest way to play the group.  Lastly, the solar plays such as STP  and CSIQ  had another good day as the earnings play noted yesterday tries to unfold.  There's no telling how much further they can go up and we don't believe the run-up will end anytime soon.

Tomorrow morning we have MON SCHN  reporting.    We'll be paying attention/ reaction to these two names as they can very well set the tone to the rest of their peers.   We also have RIMM  reporting in AH tomorrow and that's always the interesting one to watch.    Bottom line, M2M adjustment that's favoured for the financial instituions is a huge deal, in our opinion.   Right now, all signs point to a revision that'll benefit the market.   Basically, the recent market high is literally one piece of good news away from being broken out.

Early Cyclical trade underway..

One thing we haven’t seen for years is the US markets being dictated by overnight global markets, instead we’ve been riding the coattails of intraday newsflow originating from within for what seems like month after month.   This has changed recently,  maybe for the second or third time within a month large gains in Asian markets and even Europe spillover to the US markets.   We just follow.   This really isn’t a surprise,  if you believe China is leading the world out of recession which it is seemingly doing    Today, the worldwide squeeze continued as stocks surged in Asia and Europe with SP futures in tow as the safety bids in FX/ credit/ gold unwind!.     This was the key,  not the M2M fever we were waiting for in the morning.    Judging by the action in financials throughout the day,  you clearly see the M2M relaxer was not the culprit for the melt up.     Basically,  M2M changes are a  ‘middle ground’ compromise.    It’s really a wash as it is a compromise to both sides of the fight for it and against it.    So, the key is what we’ve been stamping in bold on site about eco’ data recently…."hints of stabilization".   This is probably the biggest tailwind  in the markets right now as the financial catalysts die down.   Today it seems everybody woke up screaming the end of the recession is here as we had more encouraging data worldwide!.     This is the underlying trend as eco' data is flattening out….. China March Manu PMI, China output expands finally, better than expected, UK house prices and March Auto Saar numbers probably have indicated a bottom and yesterday we also had the ISM provide a catalyst.     So, it wasn’t the financials leading this market based on M2M fever,  it was a rotation into a ‘Early cyclical’  trade, high beta groups were getting the money and some of it coming from profit taking in financials.    The heavy groups in the early cycle trade were/ are the Industrial, (transports notably, consumer discretionary/ retail / gaming and tech.    The best performing were the high beta/ high short interest equities.    Look at best performers on SP500...ODP, WYN WYNN CBS HOG HOT…can you say junk..junk..junk!     So, if you look at shadowlist the gains are not what you may expect from the individual equities listed as the groups moving today have not been in focus here,  why should they be if this just the beginning of an early cyclical rotation.    Let’s just say,  if this for real and pink or yellow shoe wearing gamblers appear we’ll have the likes of CROX and WYNN back on our trading lists in no time!..lol    Anything in the safe sectors of late, Hlth care/Biotech just lags on days like this as the risk appetite changes.   You have a choice now,  this may continue where the riff -raff may provide nice gains in the short term or just stick to trading the groups we started to again over a week ago in the commodity linked stocks.   Eventually, the USD will falter and these will be favoured all over again in a bigger scope than what we are seeing now.

The question is where did the red flags go all of a sudden?.  Here`s a few.  SPX 840-860  should be a difficult barrier to cross,  we saw hints of this today as we approached 840.   Also, the SP financials still have not taken out their  recent highs (march 23rd).   We`d like to see this to have a chance to break 860 and cause shorts to unwind quickly and cause a big run.    MSFT, yeah its not a horseman stock these days, but it reversed and turned red today.     Oh yeah,  here is a wake call potential,  the employment report!.   If the ADP number was close,  this report may not be shrugged off as the ADP was as it comes with the above barriers- question marks.  Jobs are a big lagging indicator, but they still matter providing implications for  Credit trends going foward.   Consumer confidence is the key here and its turning.   Never a bad idea to throw some caution into the tailwinds,  but any substantial dips are a buying opp`.    Nevertheless, sticking to a positive bias and looking for pockets of strength..solars or whatever group pops up.

We have had pre announcements in Med tech stocks already and we’ll watch for spill to other sec’s.  We had somewhat backwards reaction to SCHN (steel) and MON ( Ag’s)earnings.    If you look at the headline results, which would stock/ group would you think would be a better trade today?.    In reality, what do you think will do better going forward knowing what you know of the global eco‘?.   So, the reaction to these reports was surprising and may make it difficult if you want to trade right off a headline number/ guidance as soon as it crosses the wire this earnings season     We also had the RIMM  pop AMC, its not the headline Q #,  it’s the gross margin number the scurried the shorts out.    We’d love for this to be a tale of things to come this earnings season if stocks melt up on earnings, but in RIMM’s case this was pure short covering and is probably not sustainable unless this market melts up on a broad scale.

how bland!

As exciting as ‘Mayo’nnaise on pre sliced white bread!

Whatever moves happen this 4 day trading week, we won’t put too much weight into it.   If today is any indication this going to be a very quiet week of trading and unless (very doubtful) a big catalyst comes along, we don’t expect to be too busy until next week which is really the start of EPS season with GS.   

A positive bias remained over the weekend,  but with SPX cash over 840 in premkt an influential analysts (Mayo) note on the banks crossed the wire ( see IntraDay Trader link).   Futures started to weaken to high 820‘s, a slight pop at the open before a slow grind to Fridays lows of 822 on profit taking led by the financials.    Mayo’s initiations were not earth shattering and we’d just say it’s a newsflow excuse to take money off table.    There really wasn’t one main catalyst for the action today,  just a bunch small ones that combined led to swings on low volume.  Basically, we just look at today as a day to give back Fridays gains, even the late rebound is really not very noteworthy!.   Breaking 840-860 is a stretch here this week with little news flow.  We need volume, lots of it to crack these levels.   So, as noted in Intraday Trader,  815SPX is the support this week to watch.   A firm bid should originate here, if Fridays lows get taken out.

Besides Financials,  Tech' was off as well (RIMM, AAPL were strong (a few positive firm comments out this am on AAPL) and a lot of it could be due Barron’s over the weekend on both stocks.  Commod’s were pressured by USD$,  despite positive Citi commodity comments and upgrades to mining equipment stocks (BUCY, JOYG).  Still,  both items are good to see.

Stubborn

In market sense this stubborn may look as a positive,  but in reality after a 25% push in less than a month a healthy pullback of 7-10% is necessary in many eyes to go forward.     The premise at DJIM for about a month now, is that an underlying bid  comes into play on most sell offs,  including the same today after a 2 day pullback going into todays trade....  "The 'bid' should be there tomorrow to keep the steep rally in tact,  it will probably be somewhere between overnight lows on SPX cash and 815 during the day.     Simply,  we could just reverse from overnight lows if they come near 800 and go straight up into the trading day".     Despite a hiccup following the ‘FOMC minutes?”,  it still looks like a ‘straight’ uptrend from early premkt into the close on a SPX chart.     Now, we’ll see if the “first trend change this week should be a pretty good one.” comes to fruition tomorrow.     So far, so good, as it’s been about 25 SPX pts.  

You see a pullback in these improving conditions will make shorts cover, sure more gains will make them cover as well,  but shorts don’t think that way after 25% gains and will wait for a pullback.    If you go by historical evidence this pullback should come.     A healthy one is good for both sides,  it allows the shorts to cover at a better price and a door for real money to enter.    Institutions (whales) are not going to get in on the market with sidelined money after 25% gains, you’d think!.    So, this is turning into a puzzle and could even be frustrating to many a Bull.   

So, how may this be different???.   We have run out of catalysts from the gov’t many a Bear will point out , but what might be the current silver lining until stress test results or private equity deals for a financial or two, is “Earnings season’ surprising.     A big positive is we’ve seen no  "blow ups"  in pre announcements so far from any noteworthy company/ sector.    We have a good chance the majority of banks- brokers reports being decent, but you can see from the action this week many are cautious with this sector into next week.    Another we saw today as all the stocks noted in Journal reporting from AA MOS  to JNPR  had more 'decent than bad' calls and all finished GREEN.    Let's add all the consumers earnings today from BBBY  to FDO  to the mix!.

Why the price action?.   Mostly shorts are seeing these reports are not going to send these stocks sharply lower and are forced to just give up and cover.   We will have to give these more than a day to see if real money comes into buy,  you can't tell a day into it as it could be a squeeze lasting a few hours or days.

Watch  for opp's heading forward for big 1st day gains on a report due to shorts covering, even on just decent reports like these above.   A big beat report could be twice as hard!!

Bottom line...with light volumes this week we can easily move higher,  we were stuck in 815 to 825 range today.  Let`s bust thru' 825 and close the week off with a good tone into what will probably be a very decisive upcoming week with C GS GS INTC GOOG  and a slew of other reports.   Right now, we are just going with the flow into tomorrow and will wait for the eggs to hatch next week.   Many will be sunny side up, but expect a few scrambled ones in the mix.

Happy Holidays!

Tailwinds to run over 860?

Once again,   DJIM keywords for the state of the market the past while,  prevailed today.  The lead we’ve been going with in maintaining a positive bias consists of the words…tailwinds, underlying bid, resilient.   All these showed up today as stocks closed +2 SPX points after staging an impressive rally off the opening lows.    An underlying bid was again present showing resiliency and signalling tailwinds, mostly in hints of stabilization in eco' data working hand in hand with much better numbers from the banks (WFC).    Leading the market tape today was definitely the financials!.   There was no real catalysts today,  just more tailwinds generated by WFC from last week.    Although,  we did have more positive headlines from China showing trends are stabilizing,  loan growth is going through the roof and gov’t players continue to make positive commentary.

Sector watch

Banks- Brokers linked,  what can you say,  but keep with up the herd.   You know the stocks we like at DJIM.  AMC, all GS  did was set the bar higher for others with a much better expected report in many aspects.  The public offering is quite neutral on a dilution basis (limited risk).   We dipped into the V -MA for stocks linked to financials as the charts look ready for more.    It will be interesting to see the GS reaction, the market might be feeling spoiled and not give this report all it deserves initially.

Commodity linked -stocks

The $CRX  made a new recent high as the USD weakened mostly due to many of the world markets being on holiday.  Basically, if left home alone,  this USD related sector was doing what it wants and some give back may come early tomorrow.   Still, we are specific here lately with what is working,  primarily the Steels  and Ag`s-chems - and our only copper play FCX  has been a standout, even alum' AA  got up to $9.30 since we said this stock should trade up following report.(mid 7`s).  Throw in a little solar (STP ), but we're staying away from the coals.  

China linked - stocks.

A positive is no matter the hiccups the market-SPX may have soon or later,  we are getting back to individual stock- sectors working by themselves.   This was the strategy here if you recall following the Treasury buy news to go with individual- sector plays instead of being fixated with the daily SPX up and downs.    Guess what?..the China theme is seemingly here again as many of old DJIM names are coming up all over daily high screeners.   Stocks like SNDA, NTES making new highs and more to come.  One way to get your feet wet here is with CAF,  if you are not comfortable with that FXI.

Tailwinds to run over 860??...Of course,  earnings will dictate,  but if we keep getting surprises we'll have the shorts giving up and we can really overshoot 860.   The reason is this is where most of the shorts are set up from mid Jan -Feb!!.

A major eco' address tomorrow, "recession to recovery".  Hopefully,  this is just another tailwind-ish` catalyst.

SPX 864 likely new top

If you go by the title, "Recession to Recovery” of what is highlighted as an important economic address by the President and get nothing more than old rhetoric,  including a sense of distaste for Wall Street.  What do you get??.   Nothing but disappointment is the answer!.  The markets held on after the surprisingly bad eco’ data,  but lost all it’s will during/ after the address.  Once again, a D.C cloud rained on the market.  

Finally,  we got some headwinds headlines outweighing all the tailwinds.  We now have to consider that Monday's highs (864) is the short term top as we didn`t top Feb SPX870`s levels!.    If drifting lower is the case in the 2nd half of April,  it would set up for a better May -June as we get out of this overbought rally.  Watching 833 now as very short term support.

Equities,

Financials deteriorated throughout the day; SPX financial index closed off more than 7%,  big wave of profit taking following a huge surge in financials (as of Mon night, the SPX financial index was up 85% since bottoming on 3/6).   Yesterday, we said the bar set by GS might be too high for others coming up.
WFC and GS both reported strong earnings & expectations now are very high; traders worry it will
be tougher to surprise financial investors at this point.  Red flags in the numbers, we 've pointed out as all earnigs are not great.  A bunch of the regionals have been weaker (CBSH was dwn 15% today after earnings, SIVB and SUSQ have both issued large profit warnings for the Q).

GS became the first major financial firm to raise common equity from investors outside of the US Treasury (GS priced 40.65MM shrs @ $123.  While the GS pricing had been telegraphed in the press for weeks, the fact a financial was able to come to market should be taken as a positive,  (recall Bernanke in his 60 Min interview a few weeks back had said one of the things he was looking for to confirm a recovery was financial firms raising private equity)

Watch those credit trust numbers tomorrow, if AXP  is above 10%,  it's a short idea again.

AMC,
INTC - revs pretty inline; EPS much better, but they get a lot of help from tax rate, lower
charges, lower investment losses; June rev guidance flat probably a disappointment.

DJIM #16 2009

Is it really the banks that are facing and undergoing a ‘stress test’…or is it the trader/ investor, retail or institutional that is going through the real ‘stress test” now?. 

Anxious excess money + Nervous shorts

What are we talking about?.   Well, it’s simple the market is going higher and higher for weeks now and everybody is seemingly waiting for the historical to happen!.   The historical is based on data that every run -up of such +% we’re witnessing is followed by a correction (usually 5-10%) alomost 90% of the time.   Those underinvested or not participating day -to- day are crying out for this to occur so they can buy on the correction and than be in the market for the next leg up later in the year.     As well,  shorts are in a 'nervous' position in the high 870’sSPX levels as this is where many of them are set up from early in the year.   It’s a break point for them of sorts,  most are just waiting for this correction to get out with some profits that have evaporated in the last month or so.     We feel they are starting to run for cover as we push forward,  we’ve been noting this in previous Journals.    So,  here’s the stress test for the traders/investors!.    What if the ‘historical’  doesn’t happen and the market just continues higher and doesn't make a final low before pushing higher to 1000SPX!.    Most of the noise of a correction, especially in the media is comprised of ‘ Bulls’....Yes, Bulls, not Bears!.    Why? .. Well,   these are ones suffering from performance anxiety as their books will be questioned by their clients if they do not mirror the market’s rise.   Also,  they have to deal with those burning 2008 results.   There is a big discrepancy in the market and you don’t know who to really believe!.    This is essential for the markets health in the long run and that is we need the ‘whales’  participating with all the dry powder on their books.    The hedgies are playing here,  but are the MF’s and Pensions playing?.   That's where the real money is!.   We know the hedgies are here because most of the move is being led by the 'cheap' stock/ sectors and is quite narrow.   An example of this 'whale' watch' is late last week,  we had a a STT note headline, “institutional investors are backing this rally…. flows into U.S. equities were close to the highest they have been in 12 years”.    On the other side,  we have the NYXE CEO,  make rare comments saying, “the rally was driven by short-term traders trying to take advantage of high volatility and not by large institutional or other long-term investors…The real money investors are still waiting”.   Who to believe?.  

All we know is the market is going up,  sure the volume indicates it’s mostly short covering still,  but every market move is started by short covering and we just need to go with the flow.     What we do know is,  no matter who is telling the truth (everyone has an agenda) is that we are near a boiling point!.    A boiling point over 880 where the ‘correction’ thesis might be tossed out the window by ‘both sides’.     Right now,  excess money, is anxious money  for asset managers.   Those that need to cover and those that can’t wait any longer will need to step into/out the market with both feet!.   This could be huge as in a capitulation trade of sort,  not at a bottom as always discussed, but at a new short term high!.


Simply,  this could be a sustained rally that has more legs than anyone is envisioning now.   We’ve survived  some ‘mega cap’ earnings so far  (40 companies in the S&P500 have reported results, 60% beat expectations) and we have a flood of reports this week to eye.   Notwithstanding, poor bank stress test results or something dismal coming out of earning reports going forward,  we have to remain with a long trade bias.  

One possibility now regarding the underlying bid we’ve been talking about constantly, is the excess cash is probably having second thoughts about a correction sometimes and just buying the market on small pullbacks (a day or 2 worth) putting some of the cash to work instead of waiting on the 5-10% correction.   Therefore, we have this underlying bid always prevailing!

After March 23rd close...” today we surged through the 50ma and closed well above this 800 mark. (824).   This close is a big positive and the Bulls finally should have the upper hand going forward.  On a technical view,  the next big TA levels not until the upper 800's...  What's the next big catalyst?.  You got a sniff of it late today and that is if bankers- brokers raise capital through private equity deals to exit the TARP!   This is amost a clincher and what will drive this market closer to SPX 1000.    Did we say that..1000?..lol“.

This is isn’t so funny to many a Bull with excess or a nervous Bear now, as the weather gets warmer, this possibility will get much warmer in the next few months!.   We're going to get a correction,  but it may not come when all are expecting one.

..Super 'eps' Tuesday

Just when you think the ‘rally’ is in trouble…’Boom”..you get an explosive reversal as once again an underlying support bid prevails sending the shorts back to the bench.    On this side,   the seemingly momentum crashing day to SPX 833 didn’t crush our confidence.  Instead, we pointed the chance of finding support at those 830 levels yesterday and today led that we may see it get better later in the day.    The premise was shorts were scared to layout new positions over 860-870 recently and instead were covering in this area because of nosebleeds.   What they were waiting and got was a ‘bad news’ day and laid out fresh positions once 840 was taken out.    This confidence on their part extended into overnight and in the morning as they pressed new positions.   It’s the same as longs waiting for higher levels to get into a trade, except this simply works the other way with shorts as far as psychology of a trade goes.   Below 840 gave them confidence to put on more positions into the close Monday.    Thus, ugly close.  Unfortunately,  a reversal started to take shape today and by 840 on the upside they had started  throwing in the towel on their new positions.    We felt this would carry through 840 as more would lose their will and bailout.    This led to SPX closing at 850 +17 day and +23 off lows.   The shorts were a little to eager for a correction it seems.

The naysayer’s were trying to point out the BAC debacle was continuing in the morning by pinpointing earnings from banks ZION BK  KEY  RF.   Yesterday,  we talked about the market coming to it’s senses and realize there is a best of breed or at least those reporting ‘better than feared” than those above that were worse than feared.   Well,  this probably occurred as banks STT CMA HBAN  NTRS .. all started to reverse about 20%+.   USB , was a good one from the previous AMC that was forgotten.  Shorts decided to attack all these on the heels of ZION etc in the premkt/morning and got burned as the bid came into these banks.    Tomorrow morning,  we have more focus on banks w/ WFC PNC and many more reactions to watch.   This is almost over…banks reporting and it will be interesting how all this is digested heading into stress test results.    Hopefully, they will begin to trade on an individual basis than be traded as a ‘basket’ case.   Also, brokers like JEF AMTD are following up on other previous good reports.   In most cases, capitals are not deteriorating as co’s such as STT is showing improvements in the closely followed TCE’s and many are using the ‘stabilizing’ in their CC’s.

We have a few tailwinds in corporate trends and we have M&A spreading from Hcare to Techs!!. BRCM/ORCL.  Also, Geithner helped dispelling market concerns...becoming a cool testifying cucumber.

If we can avoid a ‘BAD catalyst’,  shorts will think twice before pressing new positions once again after today's failure.     On the other hand,   we don’t think there are new buyers around here to step up and push this back to 870‘s,  so we may drift up and down until one side gets the ‘catalyst’.   Most likely, it will be individual stocks/ sector fishing time as in selective stock picking…like ALGT  AKS  the past few days …Stocks/ groups like MYGN APOL ESI  are potential rebound trades.    We have some solar eps coming up, doubtful these will be pretty reports, but there may be an attempt to rally some briefly into reports.    A stock like ILMN that always has good reaction to EPS, may not this time.   A dip would likely bring in buyers lower as some that see disappointment by playing into earnings would leave their shares for real buyers.   A buy on weakness possibility from earnings present this season…CAT today as example.  Anyways,  just some scattered trader thoughts…

.wild wild SPX

A tale of two markets today as we got the drift of up and down in range until one side gets a “catalyst” to drive the market.  We discussed the idea yesterday and it pretty well played out to script.  Despite, MS’  below expectations report that drove the futures lower premkt, the market was able to pounce off the 840 mark  and continue to squeeze the leftover shorts from Tuesday.   This sizeable move takes everything along on the tape with it for a ride.   Unfortunately, the morning and afternoon moves to 860  proved to be a formidable level to knockout.   The reason in our view is as discussed last Journal this bounce is short covering so far and won’t likely see new buyers step in without a noteworthy catalyst.   The shorts have their nervousness and those wanting to go long have their scepticism in catching the SPX 860-870’s and be left holding a white flag.   Left alone fear at the top in a correction.   

Notice the same market move between 9:55 to 10:30am was the mirror image of the swoon from 3:30 to close.   We commented cautiously late this was nothing more than short covering and the financials really took a swan dive in the last 15minutes with volume. 

The day may seem like a wash in the end.  If you went fishing and traded selective stocks/ sectors it wasn’t a wash of a day at all.   We had LVS  put in almost a 20% move, AKS  trading at $11 b/c of a downgrade popped to 12.40 level quickly.    If you have scepticism of the market getting through 860-870’s as we do w/o a catalyst,  you have to take profits on intraday trades or you are simply trading against your own beliefs.   We also mentions (forum yesterday) CMG ESI  APOL CAT and Solar  idea (journal) that run some quick points, some right off the bell.   Just narrow down your shadowlist to follow individual stocks- sectors and any add-ons we toss out to trade on a daily basis until we get a possible catalyst for the market to hold plays longer in duration.

One good thing we have is a bunch of charts like CMG GYMB GES TIF  creeping up on screens for breakout plays recently.  Throw up some more in the forum.

So, the premise remains the same as we watch important levels 840/860.

Initial claims # possible mover tomorrow.

Symptoms

Predicting the implications or extent of the outbreak is impossible today.   One thing known is the market will always pick up the fear symptom of itchy sell fingers.   As pointed out,  this scare comes at a crucial time (near recent tops) and a story like this brings out the profit takers/ sellers no matter what,  thus a lower a market.    It is too early and might be a waste in days to dwell on the bug,  so chasing or shorting sub sectors is irrelevant at this juncture.   Also, the macroeconomic landscape was very different during SARS,  plus there is also treatment for this bug.   Any sector experiencing a hit may see those losses vanish quite quickly,  so be careful if playing this evolving story.   Did you know that Airlines actually did well in SARS?  There is some stupid ideas out there,  like online gaming stocks will prosper as people will stay home.  Anyone ever hear of internet ‘public’ cafes where most this gaming takes place worldwide.   This a temporary scenario now and people need to differentiate this from a permanent story.    If this ‘bug ’ever becomes a permanent story,  you won’t need to worry about sub sector plays, you’d just be able to short the broad market!.   Unfortunately,  we’d never be able to leave our homes and travel anywhere with our winnings!.

What we need to avoid now is any other negative headwind  to join this story.   If this occurs,  the market will be getting it’s medicine at support SPX 840  and will see if that underlying bid prevails again.   Today, the market showed its usual resilience and surprised many,  but a close at lows of the day..is a close at lows of the day and a negative.   

Overall,  a very quite day on the tape with trading flows light.  We’d concentrate on individual plays/ sec’s as earnings season rolls on this week.  We kept this premise string going (LVS, WYNN, PENN ) by adding MVSN  in the mid $19’s and it made new highs sooner than we thought.

'"The Premise"

It’s not a blockbuster film, but it’s the storyline being played out here at Djimstocks for over a month.   The review below, but,...  on to today's action first.

Us disappointed?.  No way, Jose!.  Okay, we didn’t get our expectation of a SPX ~880 coinciding with a XLF ~$11 close as a signal for this melt up to continue,   but it’s only a matter of time!.   We were just a little too greedy late in the day after an already great day!.  SPX875 is the true breakout for most following TA,  873.5,  a new closing high and should be sufficient for more upside as the heavy resistance is in the 866-872.  SPX 860 is support now.  

Okay, does it matter, why the melt -up?.   Recently, we pointed out overnight, *overseas market giving clues to our market day and it didn't disappoint this morning.  *Stress easing over the bank stress test issue.   Preferred to common offers instead of Gov't transfusions.  Watch if some are announced soon, you may have squeezes unfold in C/BAC especially.    **Earnings..Earnings..!.  AMC, FSLR, GMCR  are not curbing markets appetite for the riskier assets.   You want to believe parts of GDP, FOMC were the reason,  go crazy!

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Let’s just review, “The Premise“….it’s not tiresome to hear,  the premise is why we are a whisper from 880.

Encouraging Eco' data

Underlying bid prevailing on pullbacks.

This is probably our most over used, but this why we are smelling ~880.   Last,  this pointed out after Tuesday night futures held 840 twice.  “Excess money is anxious money” as asset managers put money to work as the underlying bid.

Tailwinds outweighing Headwinds, Upside 'news' risks for shorts

Resilience

Shorts not pressing new positions under 840

After getting screwed a day later recently by trying this tactic.  No reason for them to press shorts higher as the fear of tailwinds is always there.  Also, it's almost a technical issue to stay clear now.  Now, as we said late yesterday,  the ones in from April 17-20 should gradually cover as well.


“Anxious excess money + Nervous shorts“…..now equals ~880

Earnings

This has been downplayed by most outlets b/c expectations were lowered so much.  We are just getting over the 50% of reports out this season and the tone is changing to explain the melt up occurring.  We had a different tone last week,   April 23rd,  before the open, …Some encouraging 'broad'corporate trends eg.AAPL CMG EBAY ESI RCL CS PNC HSY...Maybe..just maybe for a day the mkt can stop using the ' stress test' excuse and focus on corporate . trends...April 24th, Going a little on the limb here , but underlying potential for a big day". We got a big rally that day, the premise was earnings that morning.

http://www.djimstocks.com/djim-journal-09/2009/4/24/all-about-eps-to-some.html

Tailwinds to run over 860??...Of course,  earnings will dictate,  but if we keep getting surprises we'll have the shorts giving up and we can really overshoot 860.   The reason is this is where most of the shorts are set up from mid Jan -Feb!!..April 14th.


Switch to Selective Individual plays

Concentration, consumer discretionary angle, while the market trades in a tight range on SPX.  This was something we promised back in late march after Treasury news.   At that time, it was the ‘inflation’ trade with Steels the primary trade.   That was successful, but we’ve diverted to a more cyclical recovery trade mixed w/ earnigs  eg. TIF, GYMB .    Following this trend,  we’ve avoided the grind this month of the SPX/ SPY trade that has overwhelmed traders with its boredom.    We’ve a had a trail of stock alerts go up over 20% in a few days the past week,  LVS over 50%, WYNN, PENN, CRYP ~20%  and slowly coming back to earnings plays that was the ‘heart and money’ and why we are here and many of you.  Ah, the glory days!..lol.. We added RGR  today.

After March 23rd close... today we surged through the 50ma and closed well above this 800 mark. (824).   This close is a big positive and the Bulls finally should have the upper hand going forward.  On a technical view,  the next big TA levels not until the upper 800's... ............What’s the next big catalyst?.  You got a sniff of it late today and that is if bankers- brokers raise capital through private equity deals to exit the TARP!   This is amost a clincher and what will drive this market closer to SPX 1000.    Did we say that..1000?..lol.   "This is isn’t so funny to many a Bull with excess or a nervous Bear now, as the weather gets warmer, this possibility will get much warmer in the next few months!.   We're going to get a correction,  but it may not come when all are expecting one"..April 20th.

Underlying push for the market the past month …It might not be the catalyst headline , but it’s an underlying reason since the ‘whales’, including hedgies smelling this idea since our late March note on it.

Okay.  SPX1000.    We are going there this year and probably even 1100 ,  the hiccup correction  will come, but as we recently pointed out,  what if doesn’t!!.  Well then.. we may just get a "V ' shaped recovery!!.   Now,  that would be a helluva “V” for victory.   The point is,  just keep trading with a “positve bias”  following the premise here at DJIMstocks.   We will have headwinds along the way, we will have sloppy bad days,  but we think the ‘easy’ and best trades are just beginning as we get back to concentrating on the methodology that was us.. ‘individual plays- linked to earnings’.

If we see the above bold/ underlined items falling apart,  you are seeing the beginning of the hiccup correction.  Make a print out and keep this next to your screens as a guide.

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