..joined the march?

Fittingly,  the big downside on Friday noted as purely a ES (futures) move continued its’ shenanigans overnight squarely hitting a low of ES1262 (note SPX 1060’ish technical levels here) and proceeded to crawl a total of 23 ES handles to close as Egypt was signalling some headway at least for today.  It didn't look like a ‘ million man “ES” march’ , but really more like a man or two march given the general quietness of the market.  Ahead of some important Macro data incl. US SM on deck, ECB meet-ups and jobs#,  you hope this wasn’t the bounce discussed yesterday that comes ahead of selling by the ‘man or two’, who marched it up today.  Anyways, the broad market shenanigans are not our concern as our strategy is to play individual stocks off earnings and/or sector rotations.

Shadowlist

• Momentum/earnings/“winners of ‘10 –   The ‘hiccup’ outperformance of the clouds/ momo/earnings of ’10 played out as these stocks ‘underperformed’ (CRM NFLX VMW down, others just flat), the market today.  AMC-APKT  is one to watch on Tues.
• Commodities –  The Oily (energy) space ran with ETF’s like USO OIH +2.5%  garnering most of the markets attention. CRR  hit a fresh intraday high at $117, FLS  made new intra’ hjgh before pulling back some late in the day. CLR/ CRK  are previous DJIM Haynesville plays we’re familiar with, so if this ‘energy’ streak continues we’d look for potential trades in these sorts.  Generally all cyclical sub groups (industrials, materials, energy) were helped by CHI PMI.  Note- China may not hike again into their NYears as previously thought, so commods’ should act well till the day comes shortly when we’ll know for sure.
• Q4 earnings update –  In regards to yesterday’s note, SOHU 4 point gap up and immediate loss of all the points was a little eerie, but it eventually got it all back >5% day, so earnings reactions are still okay.  The market will now become focused on CSCO  coming up for the first real ‘January Q included’ effect.  SODA  nch, OPLK were the best mid caps listed. *AMC- BIDU IRF , strong earnings to watch.

Who..How...Why

Who..How..Why…WTF?,  is the general head scratching mode of the market after ~45ES reversal the past 2 days.    It’s true not many envisioned such a quick snapback on either side, but that’s where the power lies and that is when you make a bet (short) against this market you are easily drawn into short covering as soon as the legendary ‘dip buyer’s appear!.   You are simply forced to cover.  The fact covered that the initial sell off was ES SPY/ETF just adds fuel to the reversal as its where many play because of the liquidity allowing for easy in’s and out’s.   

As said since late Friday, Egypt was the perfect excuse in a market ready for a correction at peak earnings season, but investors didn’t ‘panic’ and held long positions (DJIM#5).   You add the air pockets discussed Friday to 1260( w/20ma bust) that got hit so gracefully in an overnight ‘air pocket’ you can say and kaboom all ingredients are there for what many are head scratching about tonight.   In all, it’s great to see, earnings are still bought indicating more downside was not in the cards, but we’ve come to “ SPX 1307’ish’ as the ‘R” not 1300 as noted last week.   Today, we’ve been at this level since 1pm. (Like to see RUT hit NCH’s as well for market to follow through).  It’s possible to overshoot into the low 1310’s, but around these levels from 1307 to low 1310’s is where we’d watch for selling into this 2 day strength with China hike?, ECB, NFP #, being possible catalysts.   Again, watch ES/SPY vs. Shadowlist to gauge any importance.

...EPS EPS

While the ES/SPY traders are mired in a tight ‘digestion’ range today, it is the strategy of focus on earnings linked stocks that provided most of the excitement.  Although some may see it as “R” at 1307’ish at work, it is also natural for the market to go through a digestion process after a big spike ahead of some potential catalysts ECB-Trichet, Bernanke , NFP #.   All in, it’s a wishy washy diagnosis for the broad market.  Tonight, judging by ES, market is turning a blind eye to Egypt and region, which could turn costly if too complacent.

Shadowlist

• Momentum/earnings/“winners of ‘10 –   last section update, APKT  was noted as one to watch off earnings and today it seemed to be the play of the day, but it wasn’t the only one as it took fellow DJIM’ BSFT  for a similar ride up to >20%.  Just like last Q post EQIX meltdown, earnings are once again stabilizing the sector along with M&A activity (TMRK and NAVI).  SMid caps are definitely having the best earnings reactions in the marketplace, even though the RUT is not making new highs.  QLIK , if you follow a narrow band of stocks per Shadowlist, you get a feel of a stocks habits.  In this case if volume comes, it’s usually signals a move pretty soon and that’s why it was alerted to watch.
• Commodities – All DJIM stock links to Ag/Coal/ steel are simply on cyclone watch worries.  CLF coming to new highs.
• Q4 earnings update –  AMC, SFLY  OTEX  strong reports.

..hangin' tough

The “Bull” stomped it’s toe early morning to 9ema on the SPX and immediately was helped by dip buyers to get back on it’s course!. The markets resiliency day after day is simply impressive and why shouldn’t it be?.. Just look at today…a strengthening economy as more good Eco data came in, v..good micro # continued, an unwavering Bernanke, a less hawkish Trichet, a surprising consumer who shopped rain or sleet or snow(retail #’s), what more can you ask for?. Okay, just one thing and that is a ‘surprising upbeat NFP# and the market we’ll find itself at pre Lehman Aug ’08 highs.  It will be interesting to see what the market does at this symbolic, if not ironic juncture!

Shadowlist

• Momentum/earnings/“winners of ‘10 –   As discussed , if earnings from “cloud/data..”improve following FFIV’s disappointment, the groups share prices will improve as last Q. FFIV’s past 2-3 days are all you need to see.
• Commodities –  cyclone wavered and commods were hit early, only to make an impressive comeback!. Would not be surprised to see follow through from names like CLF, X (steel linked)
• Consumer – Was today a turning point? If so, we can look at LULU FOSL TIF RL names to trade soon.
• Q4 earnings update –  OPLK, OPNT put in 3-4% days after consolidating post-EPS. AMC, JDSU  put in one of best big beats this season.

DJIM #6 2011

While the market was trying to decipher the puzzle known as the NFP# premarket, DJIM was scouring its notes for some sympathy optical plays following JDSU  stellar report.  It’s been awhile since we had some fiber in our trading diet, but were able to pull 2 (NPTN FN )  at the opening bell that were not getting sniffed out.  Importantly, they didn’t gap like the FNSR.   Although, we cover the SPX, our first concern is always stock picking based on earnings/ sector rotations in a good or bad broad market.  As far as the broad market ahead, it’s a light eco ’data week with CSCO reporting the first notable Jan Q end.

Shadowlist

Momentum/earnings/“winners of ‘10 –   As of Friday eager traders are already hallucinating the ‘Fiber’ trade will be the ‘Cloud’ trade of 2011!.   If a herd mentality comes, we’ll play along, but to make any longer term bets would be a little premature.  As far as “clouds’, this is a pretty big week in earnings for the space (EQIX,AKAM,RAX), so hopefully they don’t burst the better sentiment recently.

Consumer – Entering Friday’s trade…Was today a turning point? Don’t know for how long, but it was good to see LULU FOSL  etc. come back to life

..and up it melts

Seemingly after weeks of noting SPX 1307’ish as ‘R” resistance, the market opened firmly on M&A Monday (3 deals) and overshot to 1320 with an eye on 1333 (666X2).  Yep, that’s 2x from what we called the ‘Mark of the beast’ , March 10^th,2009…

”Usually,  we have a case of mouths calling the market bottoms, nobody is doing that now at this level and instead calls for 500-600 gravity pulls are all over the place.    We like this as well for a better chance to get a meaningful bounce from the 'Mark of the Beast' 666 level”.  

A devil of a rally proceeded at that time and after a few hiccups along the way, the market finds itself in a midst of a continuous gradual melt up 2 years later.   The headwinds  of economic data, corporate earnings, money flow away from emerging markets/ bonds, Easy Ben..(Today M&A) outweigh any single ‘day event ‘ tailwind  in the Bulls favour.   There is absolutely no reason for the shorts to step up and risk being thrown under the bus as per recent ‘Egypt’ situation again.  The same premise exists here as it has for months.  As long as this lack of tailwinds persists, any pullback will be shallow as dip buyers will come in.

Shadowlist

• Momentum/earnings/“winners of ‘10 –   Besides AAPL  making fresh highs, most winners/momo’s couldn’t be found in the top SP tech performers on the day as it’s pretty quiet following a nice week.  As said, CSCO earnings are ahead and are being waited in as are some notable ‘cloud, data center’ names for direction. *SOX was a notable underperformer, it’s been a leader, so it’s lack of participation in market making new highs is some crumbs for the Bears.
• Commodities –  mostly mixed, DJIM oily/energy linked plays  FLS, CRR  are holding up well, (GTLS  got a pump Cramer job), LNN  part of our Ag’/fert rotation play since late Dec hit fresh highs while CLF (steel/coal) keeps hovering around new highs.
• Consumer – Our retailer names  LULU, FOSL, RL  continue to trade well /inline with broader tape. SODA,  a Jan alert preceeding its big day from $33 made NCH >$44(new closing high) on addition to IBD 50.
• Financials–  After flat lining all earnings season was today a wake up? $BKX.   Well, a history of headfakes is in it’s blood, so no telling from one day.  It is European bank reporting time, so they will likely feed of their reports.

..same

Another day, another leech on the back of the Bear!.  If only the trading Bear would do as their namesake and hibernate for the winter to save it’s hide!.   Unfortunately, the Bull is only given incremental up days, one after another as the lack of short exposure doesn’t allow for many ‘big’ up days.  As seen recently (Egypt situation)any short willing to press positions quickly covers at first sign of another failed attempt at downside.   Today, 2 hawkish Fed speaks/ China hike didn’t dampen accumulation of shares in the broad market.  Even though these are not catalysts to us,  it used to be that the market in recent years would gyrate on any small bit of negativity. This just shows the maturity of the market as it’s on one track mind to global economic strength.

Shadowlist

• Momentum/earnings/winners of ‘10 –   The risk in CSCO’s outlook exists following last Q and is keeping the movers at bay.  The only fuel for the Bears this week is the underperformance (2^nd day)of SOX to the tape, but this might be only a condition of some profit taking from the best group so far in ’11.  Air out of the NVDA’s semi types is a good thing.  On the hand, we are seeing  rotation as pointed out in the last few Journals to the consumer sec since late last week and financials as of Monday, which the Bulls can offset with.  As far as the fiber optical plays,  consolidation is continuing after big up day on Friday and so watch for another entry soon if this has any legs as a trade in ‘11
• Commodities –  Under hike cloud today.
• Financials – day 2 of being one of the market leaders.  As per Shadowlist ,we concentrate of GS/JPM and/ or RKH (ETF) for Regionals to trade.  But, honestly with earnings plays this Q and retailers this week the plate is pretty full to get overly involved in a trade here.
• Consumer –  Our retailers/ goods are still moving inline with the tape.  Since pre-Friday trade listed DJIM’s are up 6-9% eg.  LULU  $73 to 80;s, FOSL  73’s to 78’s, RL  108-115’s, PVH  59’s to 63. 
• Q4 earnings update -  this is just a good safe stock that has constantly come across, but because it’s a crawler and unknown it has never been added to trading list.  Until now,  AZPN  is a nice safe stock at 1.3b cap in the software space following a good report.

..problem child....

The Shadowlist and it’s components pretty well show the footprints of the market today and what to watch for Thursday.  Market has traded pretty good on bad news, it will interesting to see how it reacts intraday to it’s problem child' CSCO.    A shallow dip to Monday’s SPX open gap (if hit) would be expectation for dip buying.

Shadowlist

• Momentum/earnings/“winners of ‘10 –   we’ve been cautious on all the ‘clouds-virts-data centers’  heading into CSCO’s and names like AKAM, EQIX for basically the same group of stocks.  AMC, CSCO, ..” The risk in CSCO’s outlook exists..”.    It seems many have forgotten this by it’s run into earnings and are now paying the price as guidance is 'weak'.   No matter if CSCO is a company specific issue or not again,  AKAM  is not doing any favours for all their peers.   Noted the ‘crumbs’ this week for the Bears relating to SOX (now 3 days down), well, now it’s a nugget for them possibly.  (Some bounce in opticals)
• Commodities –  “Under hike cloud today”..yesterday… Today, the cloud burst as this materials/commods (particularly coals, steels) were the biggest drag on the market ($CRX).
• Financials – streak halted at 2 days for now.  Okay, that makes 3 essential leadership groups off Shadowlist showing weakness.  Pretty obvious the market can’t have this continue tomorrow/short term.
• Consumer –  it’s been a good pocket to be in as it’s the only pocket of strength today again, led by a big earnings day reaction from RL, >10% intraday.  AMC , WFMI  is a good feel earnings story for sub groups.

Keeping the 'beat'...

Just as the playbook had it written up, the Bulls punt return team was ready to go…”A shallow dip to Monday’s SPX open gap (if hit) would be expectation for dip buying.” . Once again dip buyers see the market through rose coloured glasses and shrug of CSCO as company specific to close flat.  Same premise exists within the broad market discussed, more importantly, there is plenty of earnings stuff to trade away.  If you’re an investor in cash, you are literally short the market.

Shadowlist

• Momentum/earnings/“winners of ‘10 –   2 of the EPS play stocks noted in Journal this Q,  JDSU >3%, JNPR >7% negated CSCO’s abysmal guidance and helped other networking stocks APQT/ BSFT  ~4% each within DJIM’s list.  This was helped by Alcatel-Lucent earnings and a 2007 IPO at DJIM, IPGP (use DJIM search for more on co’), an optical laser play that guided up big time. Timing couldn’t have been better as we’ve talked a trade back here the past 2 sessions.  Also, good to see is even AKAM  did not drag others in ‘sympathy’ as this group has been prone to in the past.
• Commodities –  Mildly better action in Steel, coal linked names, but overhang exists following hike/ Brazil.
• Financials – quiet in space.
• Consumer/Q4 Earnings –  added WFMI on Journal yesterday and it continues to show earning winners are getting ‘v.positive ‘ reactions.    This is something we discussed (below link) post bad reactions in mega names and thus bar being lowered etc. early in the season.   Also, if a stock gaps 5-10%, it is still possible to get in and make points as in WFMI  $58’s-61 today, RL  yesterday,  APKT  and many more have demonstrated.  IPGP   was a little crazy much. Excellent earnings are being rewarded,  it’s as simple as that.

http://www.djimstocks.com/djim-journal-1h-2011/2011/1/21/may-start-to-see-better-eps-reactions.html

DJIM #7 2011, Shadowlist update

The trading backdrop remains as we left it last week, except the markets will have a host of eco’ data to deal with this week, focus on ‘inflation’.  The week culminated in a big finish Friday with the ‘Opticals' stealing the show (JDSU, NPTN >12% , FN up ~8%),  a trade we were in front of all week in the Journals along with the ‘Retailers’, 8-12% on the week,(LULU, FOSL, RL).

An updated Shadowlist (below, visit site) is the only place we’ll need to look for the next ‘pocket(s)’ to trade away.  We’ve added many new plays (mostly earnings 10-15) to this year’s first list via mentions on Journal/Alert-comments since Jan 1, while removing winners from '10 eg. MOTR, ROVI in order to narrow the Composite to about 60 stocks to monitor the breath/rotation and individual stock picking.