DJIM #18 2009

Just as many begin calling a top…“a reversal bar, no follow through’’ after Thursday’s trading day,  unexpectedly a forgotten player arrives spoiling their exuberance.    We're alluding to the $CRX , MS commodity index breakout,  we noted early Friday morning.   This move should continue into Mondays trade and might leave a few to radio in Mayday on the May Day Holiday! (UK closed Mon.)    The stress tests anticipation is an overhang that leaves the financials in a holding pattern the past few days, but imagine if this CRX move wasn’t just because a ‘holiday trading day’ (most of Europe and a lot of Asia off),  and the commods’ can really breakout with earnings plays by their side!.   Maybe this was a prelude to the weekends, Kentucky Derby where a longshot of earning and commods`lift takes this rally a few furlongs longer!.    Add some possible stress relief (financials) next week and we have a possible trifecta winning ticket to SPX 1000,  a V shaped recovery in a wire to wire finish.   Put your blinkers on shorties.   As we said heading into Fridays trading,  don’t fret the day before action as long as ‘The Premise’ is not showing signs of deterioration…keep trading with a long bias.   As far as we're concerned there is no reason the SPX can’t at least be higher than where it was end of 2008 (900) in the short term.  Things are a hundred times better than they were at that stage globally, so why should we be lower.

The main positives behind the commodity action on Friday was the China PMI  (2nd straight reading suggests expansion), US ISM  and of course because many a pit trader were away or left early Friday.   Still,  if a breakout holds, days..weeks later nobody will say a word about the fact it was a light trading day.   A breakout is a breakout in most TA circles.    Energy led on crude and a rip in a sub commod' group (coals) was due to news of consolidation of a private coal co’,  it fetched half of what it was worth last year,  but a deal is a deal.  This sparked the closely related MEE PCX WLT ANR JRCC.   Also, DRYS.  posted probably better than feared numbers and even though it lost momo`by close,  it was still a quick 4% to highs from early morning post on forum.   Again, GNK  remains our fave in this sub commodity group.   While cost pressures, pricing- demand is anaemic,  the macroeconomic picture is turning to the expectation of a second half recovery.   Simply,  the end of recession view story is being expressed by the market.   Once expansion is signalled outside of China PMI,  a recovery trade will have far to go.   In great part this is because this has really been mostly a short covering rally  with lots of $$$ that will participate after the recovery is signalled to the general investing public.    This is why another say 25% is very possible with a nicely timed correction trade in 2009.    All the horses are seemingly stepping up to the gate for what will eventually be back to the 'Easy'  trade days.

Another possible trade emerged for the week ahead, the 'hedge fund' trade as BX FIG  began to move into earnings for the upcoming week.   This is related to banks- brokers strong numbers in this groups business and is probably mostly fuelled by short covering.   This is only a side show possibility as we have earnings, commods play leading the way.

Digestion..

It shouldn’t be a surprise tonight that we don‘t have much to say, we’re feeling a little bloated as we've really tried to press here lately with Journal market commentary, including premkt/ intraday and a flurry of stocks to trade.  Just like the market today,  it’s digestion time!.

This is probably the time to go over a weeks or more of a review of Journals, Forum, Alert- Comment pages to keep a level head and go over stocks and charts of recent plays,  notably many new EPS names and see how they are functioning days after their releases.    We’ll do the same so we don’t get away from our current methodology/ strategy flow.    We don’t want to be swayed by something and /or a stock(s) away from own at this point.   Going back days and reading our own Journals is an exercise we do.    It’s easy to get sidetracked on a boring or a bad market day by having the wrong info purge on your trading brain and go away from what you’ve been doing or preaching in our case.   It's easy to get  manipulated on those boring/ bad days by either watching the CNBC or making appearances at a blog or ten.!.   Stay focused to what you see is clearly working at DJIM, market direction and stocks.  Right now,  let’s keep to, “The Premise “ and the stocks we have.    As far as stocks,  do we really need anymore choices?.    Besides individual equities,  we have groups and sub-groups of those groups to trade.   We can trade commodities- linked stocks one day, we can go banks- brokers the other and vice a versa.  We have new groups eg casino’s.   Even if the market has a bad day,  we all should be okay with new mid-small caps EPS plays that have emerged to hold through.   BWY ,  this new name sprung up today.   Simply, there is something everyday from what we’re following into May,  this boring profit taking day still produced standouts,  the casino’s LVS, WYNN  and the linked play CRYP , also ICE  reached triple digits!.  Oh yeah, FIG ,  noted as a possible trade in Journal going into the week was not a figment of our imagination the last 2 days.

The market should be okay if we go to low 890 levels, we saw plenty of nice bids pushing this market here the other day on SPX futures intraday.   Of course, this excludes any shell-shock surprise from Stress test or employment report.   Also,  CSCO  Thursday AMC, this will be interesting as it is a first April end report,  it will be of importance of how they say things were in April

Update on Wednesday, May 6, 2009 at 07:14AM by Demi/ YourPersonalTrader

CSCO AMC today, not Thursday per Journal.

new EPS' this Q

List comprised of new name EPS' to DJIMstocks (visit site).  Excludes, familiar names, groups we already follow.  MHP,MCO are names linked to credit picture. 

We'll see which make the grade going forward.

..blowing off some steam

Most days premarket trade flow consists of a few ETF’s,  maybe a sector and/or selected stock(s) on news.  Today it looked busier than most lunch hours trading as the trading platform lit up with action coming from every direction into 'very' green.    A carnival atmosphere...quite out of hand and a little fishy to a Bull.    The gut feeling was if this exuberance continued any higher, approx SPX940’s into and beyond the opening bell,  we’d possibly get a blow off top.   This is nothing we want to see!.   Definitely a steep decline did occur after the market drove higher into the bell,  a -350 DOW, a -70 NASD  from day high to low is not pretty,  but this wasn’t a blow off top as the SPX didn’t get any loftier than 930 as in premkt and the selling was quite orderly throughout the day and importantly we closed off the lows today and yesterdays lows on SPX to 907.   Remember, we recently said there were nice bids pushing the market just over the 900SPX  futs area the other day, well, today this 'strong hand' action gave glimpses of the underlying bid around this level as we held pretty well here all day.    Simply,  we think the market blew off some much needed steam without blowing off it’s top party hat.     SPX900 ,  hopefully it will become a psychological level,  if we close lower in the short term it will probably signal a start to a civil correction.    No matter what you call or will call today's action days later if it becomes a top to the recent rally,  a steep sell off, is a sell off that hits the recent high beta flyers the hardest.   Hopefully our premkt note on top of the Journal saved you some dollars or even made you some more off the early gap upside to sell into.

At this point the 900SPX should be looked as an opportunity to buy the dip.   Bulls don't diet.  The question is what groups(s).   Now that the stress test is seemingly resolved tonight,  we can’t see the banks- brokers leading us higher just yet.   The worst part today despite all the ‘positive’ noise on CNBC to it..was CSCO linked.   Our view that the market may see the ‘no growth on horizon’  played out!.   As we alluded to yesterday, the market  may have had enough of ‘stabilization’  buzz words and wants to hear growth juice.   It's quite funny to see this stabilization ringtone all of a sudden prevail in a sell off after we use it last night.   Stabilization is priced in now,  it's old, especially in the tech group.  A worry might be if it is going to spread to eg. commodities as the question becomes not what have you done for me lately, but what will we you do for me going forward.

We don’t like the action in (tech) the last 2 days (below 200ma now) and if we don’t have financials or the techs to lead, who will?.    Energy is a big % of the SP, but crude is coming up to resistance.  Do we really want to see it breakout here?.   Well,  maybe as traders with potentially nothing to do say yes,  but,  ideally nobody wants to see higher costs coming at this stage of a recovery.

We think the best is let the weekend come in peace and research what we really want to hold going forward.   The decision will be probably come to recent earnings plays in the not-so volatile sectors.

Have a good one!

Room for Green on Red day

 Visit site

Earnings, selective sectors mostly

Absorption

Today's tape shouldn't come as a surprise.   Not only did the banks- brokers leaders need to absorb last weeks gains,  they also need to absorb their billions of capital offerings with the market.  

Two of the prominent leaders in this rally were the Techs and Financials.   These comprised 50% of the SPX point advancement.    Last week, we highlighted the lagging tech, today we had the financials naturally pause sucking in the gains & slew of paper.    Naturally,  we pause and succumb to some profit taking as the tape goes with the recent leaders.    No matter, Banks- Brokers still acted resilient considering all they have to deal with.    If 50% of the SPX move is going on hiatus until a positive catalytic event,  we are vulnerable to the beginning of a correction for the market.  

Fortunately, here at DJIM we have focus on EPS stocks &  selective sec's.  Today while the market plays in the red,  we have stocks DJIM linked stocks EBS, (reader forum eps note),  BWY  (buy at BAC/MER today) and the Gaming /Lodging sector plays ( WYNN LVS MGM..) still showing signs of squeezing as more LV and China notes come out over weekend.   This is shown in the "Room for Green..", intraday post.   Some may look to defensive sectors like HCare, biotech etc in event of a correction,  we're fine with concentration on recent earnings which sometimes fall into those sectors anyway.   EBS has always gone against the trend of the market as seen in a yrly chart.   We've talked of eventually the market playing into our hands and the easy trade.  Imagine if today's action in EBS LMIA BWY signals a possible return one day to micro- small caps as we get to an economic trough with attention swinging back to..dare we say it back to IBD type of stocks, where growth matters.   Hey, why wouldn't hedgies exploit this area once again to pamper their books?

Besides FSYS  comeback to our lists,  we have added PEGA  LMIA  to our potential tradeable EPS list.  Like last weeks EPS list,  we watch to see if these make the grade,  most from last week are flirting with 9ema.

As far as tech, we have upcoming analyst meetings, tier1 conferences to watch in the short term for direction.

We held 909, at close, which represents a recent trendline, (898 a recent low-the psychological 900 )is where we want see the underlying bid prevail.

..just a 'bad dream'

Neg eco data
Yeah, we got a surprise and it wasn't a positive!.   A thud in US retail #’s, a contrast to other inflow of data and implications for Q2 consumer spending down revisions.   Add disappointing Euro & China eco data and global markets have an excuse to take profits.

Absorption
Journal headline the other day has turned into a over supply of new issuance as a influx of paper comes
to market from all corners now (commods’ , casinos, energy etc.) besides all the financial paper.   Nobody
wants to be left out and May has become the largest offering month ever and we’re only ½ way through
the month!.   Can the market absorb all this?.   It’s highly unlikely if more and more comes to the market. This is a concern now.   What we don’t like about this is you need to take out profits from equities to pay for this!   A profit taking rotation of sorts, including into US tsys from equity profits is occurring.

Technical
A number of technical supports taken out in a sweep!.  SPX809, the shortest trend line on gap down and than the 891-894 uptrend many are following. As the market slides further the shorts begin to get comfy in pressing new positions. They did this with NAS100 first. SPX880 is 20MA and next level to watch.  A problem today is as some shorts start to press and there was no evidence of institutional buying support. A double or maybe triple whammy of sorts. Increasing short activity + profit taking (inc. supply issue) + lack of institutional buy (underlying bid) today.

We said,  we’ll only know for sure later down the line if our blow off top note comes to fruition. Looking back 5 trading days when the platform lid up like a XMAS Thursday premkt , including garbage stocks as usual have spelled an end to a big rally and a correction. It’s irrelevant if it’s a blow off top or just a regular temporary top.   A correction is a correction and its hardly a surprise as we outlined this weekend DJIM #19.   So far, we like that fact a 5% correction  has been orderly and a usual correction is 7%-10,  so we could get a bounce very soon around here.  The SPX seemed to base for about 3 hrs yesterday at these levels ~885-880.   Maybe it seems civil to us because we’ve been excluded from most of the downside since as we were apprehensive of the goings on.  Last week,  we warned we didn’t like the action in Tech (Wed-Thur) and wondered who can possibly lead as it’s not going to be the financials or tech at that point.    We also worried about this spreading to commodities and hitting high beta stocks/ groups, which it has.

What is critical is not to have this pick up speed, which would occur with shorts getting cocky, more profit taking and the lack of an underlying bid coming back.

We’d look for any upside bounce to be a traders call and not those looking for the pullback to buy for longer term.  Let's get an under 600k claims tomorrow and throw the shorts entering yesterday for a loop!

..sittings on their hands

Following up on yesterday’s Journal,  a few good points to after..."just a bad dream"

Technical

We had shorts back -up from laying out fresh shorts at 20MA levels and we had a lack of institutional buyside support over 895.   This has been support since rally began in March.  The shorts didn’t press around ~880 to push the market lower and the institutions were not there to push the market beyond 895-900.  What you get is a purely technical driven trading day with no conviction from either side.   Thus, you also get a very quiet low volume day.

Neg eco data  

We  had another bad eco data point, the IJC # bounced higher, but the market blew it off unlike yesterday retail #.  

Absorption

We said yesterday,  secondary offerings are starting to be a concern to us because of the sheer volume and how they‘ve spread to broad market.   Today, we had a quiet day on this front, one or two deals since Wednesday night.   The market needs to work through all these deals and its good to see this slow for a day.  Even the ‘fat cats’ need time to digest this supply and the markets need this activity to ease!.

Despite,  this being a pure technical driven day and despite more sell volume on the downside after messing with 895-900 in the afternoon than on the earlier upside, (see chart), we had buyers go into the rally groups (banks- brokers, techs) and away from the safety trade.   Tomorrow is OPEX day and usually  noise of volatility comes with it.  We usually find these to be one the most dullest events, so we’re not expecting much tomorrow.  By saying this, we hope we jinx the market to do something.    As we said yesterday,  this is a 'traders call' (Eg, Casino's provide a 3-4% short lived rip after an intraday post),  as we bounce within a range.   The late day market selling confirmed it’s too early to jump in with both feet for the longer term once again, but dipping a toe above 20ma won't drown you either.   There is really no point to step in front of a lot of catalytic potential events next week, such as a ton of retail (HD)/ tech (HPQ) equity reports,  a kick off to tech conferences as co‘ will tell how life is after their Q1‘s is going. (recall last Q we pointed out the significance of these and they definitely moved the group after).    Simply,  we are reluctant to get in ahead of next week in any meaningful size with the rest of the market. 

Tomorrow,  we’ll probably see more mixed trade off eco data points, hardly a reason to get off your hands.

Triple play rally!

What's a triple play rally and what are the ingredients to such?  Well, in our view it's a combination of 3 players getting into the act!.  We clearly had that today!

1- Recent week worth of trading was a week of lower highs, lower lows.   This is a clear sign shorts were starting to press fresh new positions.   Every time there was a blip upwards, the shorts would press positions lower and lower (thus lower highs) as they were becoming a little giddy after not having this opportunity for weeks.   So what happens when this pattern of lower highs/ lows gets busted over ~896 today, including holding overnight support at May 4ht lows.    Yep, you get them shorts scrambling to cover once again.   Ingredient number one is short covering.  (See alert comment around 2:45pm before the next rip up to know where we think we’re probably going now).

2- We’ve talked a lot about 5% SPX correction  as a measuring stick,  it also coincided with 20ma and a great place to find an underlying bid.   Look back to the April's 5% dip that brought out buyers, eventually leading to 930 highs.  Today,  we got this sidelined money  seeing this market doesn’t want to break 20ma and use the 5% as reason enough to get in. 

3-  The sidelined money (longer term $) + short covering equals momentum money coming out   to play and only adding to the fury of buying.    Last week as everyone was saying get into the "safety trade",  we said we’d hang up the phone on our clients if we were brokers asked to switch to such a trade going forward.   Clearly what we saw today was a rush to 'higher beta stock and groups'  as money from the safety stocks- groups was a source of funds to switch in higher beta’s once again.   No better sign of this was in Casino- lodging stocks.   Last Fridays alert buy in to WMS  was timely and others like HOT, WYNN, LVS  and the more spec' MGM  provided big gains across the board.

Of course in order to have a triple rally,  you need a catalyst or 2 …to wake the sleeping giants from their 'quiet period' and we pointed out a few we were looking for.   You probably did not see ours mentioned anywhere as a potential catalysts to reverse this market in the upcoming week. 

1) One part for the banks- brokers was our underlined, determination to repay TARP.    Only near the close did the headline finally come across that GS-JPM-MS  have applied to repay 45 bln in TARP.  STT applied earlier.  If you think our mkt went up all day because of Indian mkts and not the fact this `determination = apply` was making the rounds all day with institutions types,  you’re greatly mistaken.    *Also importantly was Geit`s saying he doesn’t want to see executive comp. limits.    This always makes Wall street happy.   *We also think Barron’s negative article on Treasury’s was a lift to equities as this says go to riskier assets such as stocks!. 

2)A wake call for Tech was the possibility of the what comes out of the upcoming tier 1 tech conference.   This provided some positive eco` comments, such as NVDA`s,  'market bottomed..product demand growing and improving from last 2 Q`s'.    Tomorrow, we`ll hear from companies like NOK, IBM, EBAY ,  we also have April Q reports coming from HPQ BRCD ADSK soon to add more clarity to trends after the official Jan thru March earnings season.

3) We even got a 3rd catalyst from earnings side of things.   We pinpointed HD last week, but LOW`s gave enough in a positive beat and raise to guidance before HD`s report tomorrow.

Points 2 and 3 is something shorts are not really expecting as they keep saying earnings season is over with.  They are missing the point these April Q end reports can do some serious damage to their thinking earnings season is done with.   These give a glimpse to what is happening after March and if its good,  it points to a better than expected Q2 reporting season.

We had a good NAHB number today, tomorrow we get what could be as crucial to markets mood as Retail was last week in the form of housing starts and building permits.

Roll...

Roll..Roll the equities!.  You never want to see equities rollover midday like today back to overnight SPX futures low (903) after a rip to 923,  but,  since the upside move caught many by surprise,  including longs with profits out of nowhere since Friday when the end of the world call was coming from Bears at 875SPX.    Why not take unexpected profits before a long weekend??.   We doubt shorts were in any condition to lay out fresh positions today considering they just got burned pressing, ironing their shorts on lower highs/lower lows last week.   So, maybe until we get more eco’ data, such as tomorrow's (Phily Fed (May biz) , we really have to stick to the notion of being in a range of (875-929).    We'd rest if we break the recent break to upside levels of ~895-896 , we wouldn't be plucking at dips till lower.

A lot of the attention today was on the breakdown of the Greenback.   This fall has just invigorated the reflation trade further since the treasury move in March.   We don’t mind profit taking,  but when it’s mixed with a failed breakout as seen by the $CRX  daily,  we would caution here for a breather, even,  if the $USD falls further out of bed overnight.!   The FED statements implying more purchasing whipped the USD more, but the commodities- linked trade faltered.  Simply…the persistent weakness in $USD with commodity stocks trade diverged finally in the afternoon.    Also, we didn’t like action or data from CAT.  A little bit of the ‘stabilzation’ talk , one point we were highlighting in ‘The Premise’  to keep this mkt rolling on is getting nicked a bit here.  Thus, we are watching the Phily Fed for a possible downtick # as a cautionary tale.

DJIM #21 2009

Friday’s last hour gyrations just exemplified the week that was.   Most notably,  a week of low volume encompassing a triple rally day and a 40+SPX point sell off to close off just where we had opened Monday morning at $SPX ~885-887.   A clumsy week and no promises of the tape improving with little or no news flow expectations in the way of eco’ data points in  a shortened 4 day trading week.   

One area of significance is the 20ma to watch.  We’ve talked about this being the support line for the advancement since March and with Friday’s close under it,  we will watch more carefully.   We don’t want to see any meaningful close under this level in the upcoming week.   The only thing last week accomplished was this 20ma line moving higher day by day, while the market tape accomplished nothing by Friday's close.   Right now, the tape looks vulnerable as it won’t take much to get that negative close.    Basically, any break of Thursday reversal lows at 879 to 875(range low)  will be one of caution.    A huge TSY issuance this week along with an eye on if the FED will pick up the pace of their purchasing will be closely watched.

As far as individual stocks/ groups,  the picture is just as murky as the broad tape with no signs of rotation into a particular group.   The banks- brokers lagged any upside last week and the Techs, despite better than expected results and outlooks went pretty well unnoticed or cared for.   The $USD watch will lead the commod’ trade, most likely.  Also, we'd wait for a $CRX breakout (if) for now to initate fresh positions.

We just have to wait it out here and be selective if going in for a trade.

...a hissy tsy fit

As Bullish as we‘ve been now for months,  it never hurts to be rational and keep pace with your own strategy even if the markets get giddy as following the CCI#.    Entering the week we were saying the focus will be on the TSY auctions/ FED purchases and warned entering the trading day in regards to TSY’s,…”…It seems the market will use anything as a catalyst these days, keep this in mind,  it could work the other way later in the week on something seemingly not so crucial at first glance.”.    Well,  it certainly came to fruition as out of the blue the market worked the other way ..ramping down on a rare market catalyst!… Despite a successful/ solid 5 yr auction by all accounts,  the bond market spoke out shifting pain into mortgages by putting the ball in the FED court challenging them and their ability to sustain low mtg rates..   (purchasing MBS…What will they do and what will be the reaction?).   The consequences, debates will be in full force now,  we as traders do need to worry about the implications of higher borrowing costs tomorrow than they were yesterday with this spike in TSY yields.    A simple question arises from today‘s events, how will those CCI giddy households feel tomorrow, next week about an economic recovery?

Banks- Brokers,

A steep decline in TSY/ higher mtg rates weighted on the group late and will continue to do so putting the idea of a higher mkt an unlikely event without their participation.   Let’s not beat around the bush here, we all know where the cash came from in WFC BAC , don’t we?  What will the next Q’s look like if this primary benefit to the banks stops?.  

Commods’,

As we’ve been saying,  we’re not going to do anything other than maybe intraday trading unless the $CRX breaks out.  Once again a potential upward tick to the 630 level was thwarted.  A slight positive for steel names from MT, but a neg from MON for ferts/ seeds stocks was the news flow.

Techs’,

Unfortunately this glimmer of a potential leading indicator got caught with broad market tape in the afternoon.  The thesis we put out midday may still hold and so we’ll be watching this sec’ for trades. We got another positive reading as CREE a June Q end EPS preannounce/ guided higher and there were ‘ tracking better’ comments from more companies at a Barclays conference.  Elsewhere,  CVLT, CEO had very positive comments and considering a similar co (DDUP) just got a bid from NTAP is reason enough to tradelist it.  

Simply,  we are still mired in a low trading volume environment and overdone gyrations in the broad market tape continue to be a given , we remain in the larger trading range.   The end of the world was coming last week as supposedly anything in USD was being sold following SP/UK news and than it was all sunny again, and than seemingly forgotten come CCI#.    Heading into tomorrow,  we basically have a bearish- hold- bullish view on the above 3 sec’s.    To us,  that’s a pretty foggy market leaving one to be very selective.  We lost an upside risk  for the time being this afternoon.   The upside risk was not a news catalyst this time as we‘ve had for weeks now frightening the shorts, it was "920-930 levels" , every inch closer put pressure on the shorts.   They have some relief and now we’ll see if they start to press shorts on any upticks,  unfortunately they may not get the volume ammunition from their peers needed end of week.   *Jobless claims 830am

..Memorial 'week'

Since when is this a 2 week holiday?...It definitely has this feel for the markets!

As the market finished near highs (SPX 906) of the day, the overall volume was actually better than last couple of days, it‘s always a better tale if it‘s greater on the upside than downside.    This tells us that more participants are coming back from the Memorial holiday.   It’s about time, it is Thursday!!    Action was pretty good today,  but it was also a bit boring and scattered as the lovefest with '900' drags along.   The focus remained  on TSY and today’s auction  bid up stocks in the afternoon.    As discussed yesterday,   just like the SP/UK doom the ‘hissy TSY fit ‘ evaporated.    What we saw in Treasury’s yesterday was a rare hedging event,  hopefully investors/ traders won’t be consumed of playing equities on every tick up or down on the yield.   We’re even guilty today as we put the $TNX on our trading plat’s!.  BUT! ..in the bigger picture,  the newsmaker besides TSY is crude today, a higher TSY and a higher Oil price cannot go hand in hand.  It will make all our best expectations very gloomy!.

What is so fascinating about this market is its trading range of late.  It literally takes one day to go from top of its range to the bottom of its range, and vice versa.    One good day,  we are back near the top while a bad day will get us to the bottom of the range.     This has been going on for almost the entire month of May.   Someone has to give up eventually, we say!    To us, regardless what happens to the outcome of this consolidation,  we feel the upside potential far outweighs the downside risk.    While we can see the down side risk to SPX 825 to SPX 840,  we just can't see the upside limit at this point.    Basically, the longer you consolidate at the current range, the more likelihood we'd go into some new territory if we break out.    This is under the assumption that this market stays in the current sentiment.   If the sentiment improves, even better.   

The ‘ holding pattern’,  we think is the market waiting for China to make the next move literally.  It’s been pretty quiet lately after the initial ‘leg’ up and now we wait for signals for the global , eco’ outlook from China.   This will (if positive) include help for the tech outlook and definitely the commodity picture for the 2nd half of the year.

We remember last summer's action was a bit brutal.    All of the momentum stocks were taken down hard last summer and we were literally out of stuff to play long .    But, now it’s a different game as the economic trough  nears this summer.   This time, with the current earning period at an end,  we have an abundance of earning plays on our list that we can play for and from what we can see Q2 won’t be bad at all for Technolgy co’s    Generally,  healthy sentiment toward the equity market is all we really need for our strategy to work in this summer,  even if the market doesn’t power beyond SPX1000,  we feel it will provide a sector/ group play.   It might be Tech, Commods, China with EPS the coating feature in those or others.

Tomorrow is the last day of this ‘Memorial week’ and we definitely can tick a little higher tomorrow based on today's picture.  This will set up for the possibility of getting a volume break…NDX, CRX and ultimately the SPX very soon.   As we said the other day in Alerts-comments,  the break should be already underway in the vicinity of 915-920.    Right now,  we feel that bulls definitely have an upper hand heading into the weekend.    According to the Bears, we should be at least a hundred points lower than where we are now.    As long as the Bears see the upside risk in the SPX break levels and with many people still on sideline,  we have a really good chance to do some damage on the upside going forward..

DJIM #22 2009

The majority of those interested in the market just look at Fridays box score and see a good close near May highs.  This is all that matters!.  A minority since 4:00pm Friday were trying to reach Oliver Stone and give their conspiracy theories to the action in the last few minutes of the market as seen in the above chart.   Some of their proposed movie scripts include Rogue trader fat buy finger,  hedge fund imploding,  TARP monies flooding the close,  GS painting the close,  Robots as in computers only doing the trading etc….. Our view is simple...who cares as all the above fits into one thing we’ve been painting here and that is the ‘UPSIDE RISK'   was of creeping closer to 920-930 levels.    This involves Bears covering,  Bulls chasing the same scenario/levels no matter which of the above conspiracy theories you may include.    Last Wednesday with the SPX below 910,  we said a clear break should be underway in the vicinity of 915-920 and that it would be a little late (buying) at those 930’s breakout levels all eyes were on at the time.    Judging by the ES futs chart we got exactly that from 910 to a high 927.75 in a few minutes.  We have to admit it was quite hilarious and exceeded our best expectations of a move to May highs.    So what now?.   Well,  yesterdays (Friday) is history and tomorrow is a mystery!…Well, it’s actually not a mystery to a start Monday thanks to tonights China PMI number.   Expansionary threshold very much in tact with this reading!

In Friday`s Journal, we discussed the probability the market was in a holding pattern awaiting new and further signals from China.  We hope the PMI is a start,  it should at least give us a good open to flirt with 930 levels.    If this PMI was not good,  we might’ve seen a blow off top in Friday‘s close.    More importantly,  our inflation trade with commodity linked stocks since March looks to continue forward.   Keep in mind when the market basically skips 20 points such as on the SPX,  it will look for a reason to pullback and so keep a close eye on the US ISM survey num’  in the morning.  

A jam packed week with eco’ data points, crude, $USD, TSY’s, all providing plenty of news flow at critical potential breakout levels!.

Hug me...I'm tired

That’s basically all the SPX said to the flatline today as the tape rested after ripping nearly 50 handles in a few hours the past few days.   Surprisingly,  the selling/ profit taking was very orderly,  despite the second day of financials lagging.   After a break of over a week on issuances, the banks- brokers began tossing new supply out due to new rules by Treasury to exit TARP.   Shorts are trying to paint a picture of this lagging group in the advance as a fuse to breakdown,  but it’s not working as the market is saying the banks-brokers got this rally started and it’s healthy that we can move 50 SPX handles and than rest today without their participation. Still, watch carefully if all this new supply and more becomes a noise 'concern'

One of the big leading groups has been the commodity linked stocks as the PMI #’s and a collapsing USD are responsible for the latest advance and the high beta group of stocks we follow surely would be the first to take a breather.   If this is all the breathing space they need today, we’ll ..then we won’t get our welcomed pullback to buy cheaper.  But, we doubt that.   You have to be realistic here, no matter the PMI #’s forward look for the sectors, the USD has sunk about 12% from March highs and unless it’s dropped as the reserve currency overnight the equities can only rip so far before resting.  The USD, strength in it will most likely put pressure on the linked equities, so we’ll wait for such to re-initiate positions.

Some defensive posturing was underway today, but as we said a few weeks ago when those disbelievers tried to get a defensive rotation going,  we’d hang up the phone on you if you tried to request such from us.   Look back now and see what you would have missed if you let Briefingcom and such to your talking for you at that point. “ garbage rally..signs of froth”,  May 12th…The DJIM safety/ defensive trade has been a focus on earnings linked stocks,  you may say.

http://www.djimstocks.com/djim-journal-09/2009/5/13/a-healthy-tape.html

Today gave an opportunity to look around and what we found was quite a few plays, only now possibly setting up for moves such as SAFM, ARUN  that really didn’t participate in this latest rip because they have been consolidating their earning reports.   Both pressed to 2009 NCH at close after notes today. The best rip and right out of the gate today was the 17% shuttle from CVLT ,  last Wednesday we alerted it as DDUP connection and today this was highlighted by a firm and led to the burst.  A 25% move since.   Again, this pinpoints selective stock picking, we think we have accumulated an excellent group in May that has been safe (meaning you’re not losing money holding) and with good pullbacks, they pay back well if you want to book profits.   Of course, most are earning related.

On a group we haven’t covered for awhile is the Haynesville Shale grp, E&P stocks. GDP  had very strong well results Monday night and stock outperformed energy linked stocks.  PVA, last night had v.good drill as well and may react similarly off the bell.   So, we'lll monitor this theme for any further potential in days to come as well.

If today is any indication of the next 2 days leading into the NFP -employment #'s,  we`ll take it, but realistically after this rip we need to digest more than what we saw today and a stronger $USD (commods’) & possible concerns on more supply issuance by banks- brokers may provide such.