Rollover theme?

We can literally begin tonight’s Journal in the same manner as yesterdays as early thoughts returned of trying for 2010 highs soon.... a steady grind high continued,  yet once again the clock struck 2pm and we sold off to close nearly flat on the day.    It’s one step forward, one step back for the last 2 days.  This time the culprit was ‘ DC ’.  

Market just got used ‘DC’ risk being off the table, this is not something we want to see rear it’s ugly head again and gain steam as today with ‘Volker’ noise.    At least the selling is not happening in the last 30 minutes of the day, which would be a bad sign.   This likely‘ take a breather’ action preludes a few potential catalysts and we shouldn’t look at it as the market encountering heavy resistance just yet,  but just a normal course of wait and see for a catalyst at many technical level (including SPX1123 ).  There is a lot of technical ’fib’ stuff between here and 1130 and than back up to 2010 highs.   If positives emerge in the next few days,  but the market continues this trend of losing steam and rolling over,  it would signal a tired and overbought market and more caution would be necessary.  

A few more signs still today, we’re moving in the right direction....

M&A, which we discussed as a potential catalyst last night got another boost (NOVL) and Eco’data was on the right track.  This is all good but near term,  we patiently wait to see how the debt offering is received (demand) in Greece (and resolution) + if China puts in more curbs ahead or after their congress starts + NFP#.  

In the meantime, EPS plays continue to act well.  PLT  continued on today and we liked what MFB  put up in their report today.  Another play to shadowlist is FARO , which has consolidated it’s recent report in good fashion on the charts.

'Snow job' report?

SPX1123 has been the theme the past few days here and guess what?.   The market hit this mark by 10am and backed off and than struggled to stay green midday showcasing more of the tiredness signs.   But, a last hour push up and guess what, we closed at 1123!.   Just a wait and see market,  no conviction buying,  an underlying bid on any weakness and shorts afraid of upside risk.   Market is shrugging off all negative data today as a ‘stormy weather’ excuse and is thinking the same for tomorrow’s NFP #.    A bad number may work as an excuse (say it's worse (-100-140K) and market sells off, we'd be buyers most likely as an underlying bid on weakness should prevail.  But guess what?.  A surprise strong number and we likely gap!.   Now, that might be a ‘snow job’  report.   A combo today of a higher USD+ lower 2yrTSY may be the signal of such a surprise.    Do we want this possibility?.  Well, our concern is of a gap up that would be followed up by a sell on the news reaction possibility at these technical levels near 2010 highs.   So, we’ll be watching for this, if a surprise number hits tomorrow,  the chasing investor may get a snow job  in the face if the market rolls over signalling the fatigue we’ve been talking past few days.  Whatever up or down swings happen intraday off whatever type of NFP report, the last 30 minutes/close will be the thing to watch.

Broadly, the banks-brokers were strong as a good nights sleep seems to have abated the ‘DC’ fear from a day before.  What side of the bed these guys wake up on tomorrow is another question!.  The bond offering in Greece was simply over subscribed and so a relief,  but, a bigger aid/ issue bond offering package is still an underlying question.    Despite,  what seems like a broad market whipsaw for a few days, earning plays are working well.  Today Shadowlisted SXCI  was the star, plus we are seeing some momo’ flow, which provides intraday opp’s or possibly longer term framed trades..ie TIVO, AAWW and CNAM  today.   Hopefully, the NFP# reaction does not derail this trend.

'On Strike'

Simply..today was a ‘strike day ' as both buyers and sellers took the day off following a busy week on many fronts.  Unfortunately,  it may be a yawner for the rest of week as catalysts are few and far between with no eco’ data/ EPS / political events on the U.S plate.   It’s a good thing as the market needs to digest the latest leg higher and for the Bears to try and muster up more scepticism on this 1 year anniversary from we called the “Mark of the Beast’ (SPX666) after the March 9th close.   The wrath of the “Bull’ is still upon the marked and tormented ‘ Bear’ to this day a year later.
 
Today was also an opportunity for an education day,  we either do some homework on potential plays looking forward or go back to see where we were a year ago and how we were thinking and handling the situation at hand. (Journal pages #25, 26).   It never hurts to refresh your trading methodology...

...Mixed signals

Mixed signals... divergences, cross currents…are all over the market tape and the question is,  what is the very short term meaning??

Today,  part of this is likely the anticipation of  'hot' China numbers overnight that will get tightening..cutting stimulus noise all over again (export # today signalled some steam ahead) vs.  the BKX  breaking out today from multi month highs.  Who wins?. 

In March 2009, it was the breakout of BKX  that led the broader market to rally from March to August.   Are we in for a repeat?.   You’d think with a BKX breakout and big center banks driving to the upside, we’d see more than a 2 point up day in the Dow or another day without the DOW/SPX (biggest gainers all financials) making fresh highs (which are heavier weighted with financials) than the NASD/ R2K.  Oh yeah, airlines, rails lead the Transports to fresh highs, yet Dow pretty well flat.   All these tape divergences may be the biggest sign the market is overbought and if the China #’s  are too hot,  it may be the perfect excuse to sell off early.

DJIM #11 2010

By the conclusion of Friday’s trade, you can say both sides failed with eco data for each cause.   Despite, a hot Retail number (yet, not a huge surprise following SSS data earlier),  the Bulls had no conviction buyers step up and the reversal off the morning high was nothing the Bears (w/ a weaker consumer sentiment # ) wanted to press lower with new positions.  End result a draw of sorts with a close at SPX1150,  but a very small reversal day anyway.

We enter the week with the same premise discussed last week and that is a breakout is just 'too dreamy' before with the FOMC ahead.   In reality, this is a better safe than sorry play.   We think even a slight shift in tone from the FED is possible, surprising the market in favor of the Bears.   There is also now the China monetary policy circus gaining steam and the fear mongers are out with hike possibilities, even for this weekend.   Another “RRR” hike will come soon,  but the idea of a real hike is slim.   We think the plan there is to wait for March data, which comes in mid April before doing anything.   If they surprise with forceful action before, the market will get hurt.

Also,  market internals changed a bit Friday as the recent leader ( R2K) was the weakest of all the indexes and may have signalled a change in trend.

Super Size Me...

An interesting thing happened to the market on the way to it’s date with FOMC in the afternoon.  It seems to only occur once year, if at all.   You know what is it?.  Well, it’s called a ‘Super-Cap ’  breakout and it took place in INTC, GE  and made the FOMC almost irrelevant as long as the FED kept somewhat tight lipped. (actually were more dovish than expected).   Add the sovereign headwinds abating with Greece/ Spain in the morning news and we have a fresh SPX closing high.

So,  is the market going to be "Super Sized"  now and keep rolling to fresh highs day after day now that INTC GE broke out at their important technical levels?.    If anything this individual stock action was the “Performance Anxiety” , we alluded to the other day needed for the market to breakout and/or to at least potentially continue into month end window dressing provoking more "PA".    Of course,  we would like this to spread to other big stocks and confirm the move with volume.    But, as of tonight’s SCHW-AMTD monthly figures, you see even the retail trader is sitting on their hands with volumes down over 15-18% in Feb from Jan of this year.   Add the fact,  Asset Allocation jumped big heading into the New Year into equities from managers to over 70% and you understand there is no money left to chase (volume) this market with.    We just have to accept low volume trading is the norm going forward as it’s been from 2009......leading to a grinding higher market.

..blinkers on

Nothing occurred today to say anything differently from yesterday’s Journal.  Except, we could add today that the market has it’s ‘blinkers’  on as if China and Greece are no longer on the map!.  Yep, the same China tightening fears/ Sovereign debt issues that abated last month were in full force again this morning..... Incredibly the markets pretended for this day it doesn’t matter.  The same story discussed yesterday,  mega cap types..MMM BA GE HON outperformed.  Not very exciting trades in our books!.

Usually,  we’re always thrilled when the market shrugs off bad news and the tape trades well, but this is becoming almost comical.   A component of this is probably the quad witching/ SP rebalancing on Friday that has a tendency to make the tape trade flat into and on the day of such actions.  We don’t expect Friday’s trade to be any different. 

That's it?

Was that it?.   Was the gap down to only 1153 SPX,  the pullback/ consolidation before end of Q dressing, we’ve been discussing as a possibility into Q end.   If that’s all there was, than it was quite impressive.  “Performance Anxiety” was at it’s best and shorts were at their best running to cover at the first hint of today’s reversal after laying down some fresh positions over past few days, including some very early today.   Waiting for a decent pullback seems to be a lost cause into Q end and earnings season unless an unexpected ‘catalyst’ hit’s the wires or familiar liquidation.   “Worries” over China, Greece, and HCare today are just that…’worries’ that come and go on a daily basis and the market has started to deal with it, seemingly by finally believing in a recovery.   The action in what we call consumer discretionary stocks was definitely present today as Casino’s  did one of those regular Q squeezes on an upgrade/ some newsflow and Auto  related stocks rode the ALV report. (HAR  a shadow stock at B/O levels and MGA  is where we look.  

We all can crazy guessing where this market goes next, the nuances of the SPX,  let’s not worry and continue to just concentrate on individual stocks selection and sectors.   Even, not following the HC bill and the sectors involved,  we still dug up a shadowlisted stock to play into the story, EMS  last week on an alert on the story at $54-55 hit $61 today. 

Two things can happen, the market can roam freely and grind higher till Q end on performance anxiety and /or even until early April when the next eco’ data of significance the NFP (next Friday) &  AA-INTC earnings in reminiscent fashion of last Q or we get one of those big dreaded ‘liquidation’ moves from the hedgies we’ve seen more than once at Q end after a run-up.    Again,  let’s not worry either way by just not outweighing positions in numbers or size and take it (profits) where we can along the way and hope a move up/or down is not exaggerated for the sake of a future healthy market.   As long as new highs are being confirmed on a seemingly daily basis from different indexes,  the momentum grinder is in the Bulls hand.

..the better way

In sports, a hot team always seems to be luckier than the struggling team it’s up against.  Sometimes, a hot team with key injuries still beats up on the team in the doldrums.  Well, today’s action is similar, the Stock Market  “Bulls”  disseminated with key injuries (tons of negative news flow) managed to actually ‘win’  this one vs. the struggling “Bears“.   Also, an excellent sports franchise can bring up some rookies to fill a void in the line up, today the “Bulls" got inspiring debuts from 3 rookies in the form of IPO’s.  A positive for the future of the Bull team.

It might not look like the better team won today in the final box score, but this had to be a moral victory for today despite the (TSY bewildering weak action= Fed tightening (hawkish?) expectations,  Club Med sovereign debt moving to Portugal. 

Yes,  these new ‘noises’ may escalade, but, until it/if happens it’s just another ‘worry’ that can just as easily pass day to day, so no dwelling on the ramifications of such possibilities…just trade away and be part of the better team, the better way to go.

DJIM #13 2010

We entered Friday’s trade wondering if the Bears could muster some follow through by pressing positions on a jittery market…simply, once again, they failed to take advantage.

Now, the attention turns to what we’ve been alluding to since mid month and that is more performance chasing in the days ahead of Q end.   The reason is simple, MF managers are below the benchmark SP this Q.  The numbers of the big players below indicate they are likely not finished as they trail a 4.7% SP return by a wide margin.

Templeton 2.67%, Blackrock 2.91% have the largest assets under management and familiar names like GS 3.5%, JPM 2.94 are some examples of a group that is averaging a 3.55% Q return.

The market might feel stretched and a little jittery, but it should overcome ahead of what will be a NFP report that may print a number as high as +300,000k on Good Friday.  After the Q end is done with,  it will be interesting to see how the market positions itself ahead of a report that comes out when the market is closed.