nothing wrong with quiet..

As the bulk of significant earnings has passed, the market shifts to Macro (notably inflation) away Micro.   A busy schedule kicked off with China’s ‘newly adjusted’ CPI being leaked and coming in at less than feared.  Importantly, (alerted) import data came in surprisingly stronger than anticipated (iron ore >18%, steel >16%,copper >5.7% month over month) and got the ‘commodity’ sub group of our Shadowlist moving.  In all, the color of the tape remains consistent with nothing substantial ‘catalytic’ to cause a stir in either direction, so trade away.

Shadowlist

Momentum/earnings/“winners of ’10-   pretty quiet with some names taking breather (as in some Opticals after last weeks run) while others get a bid (IPGP).  Still, SOX,RUT supporting the market, which gives all our names a chance to move.

Commodities –  Due to inflation fears being curbed by emerging market data focus turns to stocks linked like CLF-WLT(EPS- AMC)  and X, FCX.

Bar high into eco'data..

Eco’ Data expectations were not met today, but they are a little to the moon right now on the heels of weeks of better than expected numbers.   In all, just a blip of a day and nothing more (hardly a broader change until (if) ~1312 busts.  FOMC minutes ahead tomorrow.   Again, ‘inflation’ clues will be the thing market will watch in minutes as it relates to raising interest in the future.

Shadowlist

• Momentum/earnings/“winners of ’10-   A couple of downgrades (JDSU) took down some other Optical names in sympathy. We already talked about a ‘breather’ here yesterday.  A visit to 9ema for re-entry is something to keep in mind for some names ahead. Still, JNPR, FN  trade well.  Software, QLIK  noted earlier this month, continues its turn today.  AMC- tech earnings/pre-announcements should negate weakness in SOX today.
• Commodities –  Slippage in Ferts (-4-7% one losses in POT,CF,LNN MOS) is welcomed off falling grain prices/foreign co’EPS #’s.   Some respite will provide a quick trade very soon.  Our steel-iron ore names hang in.
• Financials – Euro fin earnings are keeping the U.S linked stocks in the game.
• Consumer –  AMC-M&A (FDO) activity a boost to market morale and many sympathy trades should emerge. considering $$ stores aren't our trading cup of tea, a lateral trade may even be WFMI after some post EPS consolidation

Advance..

A day on pit road and right back on course racing to take another checkered flag with a close above SPX1333!.  The same catalysts that have motored the market for months were in effect today.  All 3 were pointed out heading into the day.  1) M&A FDO,  2) tech earning /pre-announcements from DELL/KLAC, 3) more strong euro fin earnings (SOCGEN) on the heels of Barclays.   Also, Bernanke (minutes help) didn’t stray from inflation mandate out for 2013.  The tapes color remains the same in respect to resiliency, shallow dips being bought etc.  Gauging by the Shadowlist components accumulation is present, but stocks are not being chased.  The leads to ~1% gains in the majority with a random single stock pop here or there on any given day.

Shadowlist

• Momentum/earnings/“winners of ’10-   previous days losses were negated as noted by Tuesday’s AMC newsflow.  Incremental upside in all sub groups (hardware, semi’s ,networking, opticals).  Incremental closing highs in AZPN IRF,  these EPS’ may not be runaways, but are as safe as they come allowing for greater size buys/ and almost definite dip oppy’s from these 9ema tree huggers.  NVDA,  strong guide, but its been in this momo name of 2011.
• Commodities –  Fresh highs in our closely followed CLF,X and a further 10% pop AMC in CLF following EPS.
• Financials – Euro fin earnings are keeping the U.S linked stocks in the game.(SOCGEN this time). JPM  fresh highs.

thank..Jennifer Hudson's waistline..

..for WTW and/ or my recent TBL' (Earthkeepers) purchase to get through another winter!

Coming into the week we noted ‘inflation’ would be the key ‘word’ and it has proven to be as all the market noise is related it.  Everything else, including Iranian boats and some overnight ECB buying (fat finger?), the market is turning a blind eye to as we see by recent trading day's 'green' closes.  Note, if Journals do not contain mentions of eg. boats, Middle east tensions or whatever heading into a trading day as every other media outlet,  it’s because we’ve turned a blind eye to it and are trading away the Shadowlist components.

A simple question now is does the US /global have an inflation problem?.  Okay, if so, why are the emerging markets on fire this week (>3%)?.   Sure, they’ve have beaten up so far in ‘11, but you can beat them up more on inflation fears!.   Yesterday, FOMC related forecasts didn’t change (positive)   So, this is the noise, the fear mongering, but what do you do as a trader?.  Consider this…What if inflation points ease down the road, you’ll beat yourself for not using your cash this EPS season!. That's as simple as it gets.  What we’ve been saying this Q (if not years now) is trade the earnings stories/ rotations and ignore almost everything else.   

Shadowlist

• Q4 Earnings update-  Look at today’s ~40% pops, WTW TDSC TLB, (picked TBL to alert today, but you can add all 3 to Shadowlist for now).  These are almost historical earning reaction gaps and incredibly there is more follow through intraday (see IPGP  comments recently).

• Momentum/earnings/“winners of ’10-   While some momo’10 names notably lag today in a melting up market (maybe something to monitor for broader mkt),  this year’s inclusions  to DJIM consisting of opticals/ EPS’/ new potential momo’s carry on.  NPTN, FN  alerted here at ~ $14/ $25, respectively are near highs of $21/$32.   When you catch momo, you really catch it!.  Buyers who missed the ride earlier got on board of NVDA (up >10% from red lows), despite many bearish analyst comments.   AZPN  got a $22 price tgt.

DJIM #8 2011

Events this weekend have initiated a worldwide risk off scenario ahead of the US markets open.  That’s the ‘silver lining’ as the US markets have an uncanny ability to ‘smooth’ things over .  We will know if the jitters turn to panic by watching the Shadowlist and not what occurs in the ES/SPY . At the time of the Egyptian sell off, DJIM noted the probability to snapback quickly due to it being mostly ES linked sell off.  This time we are dealing with tensions hitting the first ‘oil’ producing country and so it might be a little different this time due to 'inflation' links.

Investors have been waiting for an oppy’ to enter or re-enter at lower prices, but the expectation of this occurring on the initial gap down might be a little premature.  This investor likes to wait for things to settle down some before buying and so unless things change drastically intraday they will likely wait a full trading or two.

Simply, overnight ES/SPY and certain other ETF’s do not signal the real market tone lately, it’s underlying individual stocks that will paint a clearer / bigger of the goings on.

no rush

Judging by the ES reversing 15 points from overnight lows in the first hours of the trading day, the US market was thinking we’d have a repeat ‘smoothing ‘ as post- Egypt sell off reversal.  The shorts thought the same and the morning bounce was purely short covering.   As speculated here, investors looking to buy at dips would not chase these morning lower prices.’… the expectation of this occurring on the initial gap down might be a little premature”… .  “This time we are dealing with tensions hitting the first ‘oil’ producing country and so it might be a little different this time”.

Once the defiant madman reiterated he was nuts later in the morning,  the market started to see money flow come out of individual stocks and it was no longer a pure ES/SPY trade.   The selling was broad based, but not panicked yet.  Mostly, a lack of bids. ( “This investor likes to wait for things to settle down some before buying and so unless things change drastically they will likely wait a full trading day or two”).  Unfortunately, the inflation links (oil prices) paint a different bigger, the situation escalating instead of like Egyptian de-escalating, so this dip may have more room before buyers step in. This time the market will likely spend more time below 20MA SPX 1314 support (if busted on a close) unlike Jan 3% dip off highs (also support at today’s low 1311).  This dip is only half of the Jan shallow dip so far. 

Also, keep in mind some hawkish ECB comments kicking around (May tightening ?)), Housing eco data disappointing, NZ quake, last week’s note on ‘momo’ names lagging are more ‘headwinds in a market that doesn’t have Earnings or ‘better than expected’ eco data to act as tailwinds any longer in the short term.

Oily patch

Once again buyers showed their new found disdain for stocks as the selling picked up in individual stocks.  Our Shadowlist has provided all the clues since intraday Monday to this continuing as it showed in an uptick in individual stock selling unlike the Egypt sell off which was purely ES driven.  Anything high beta (momo), anything with healthy earnings this Q is seeing money being pulled out slowly generating >5% daily losses across the board.

Yesterday, noted the sell off was only half of the 3% dip in January.  Well, today that was quickly matched as supports fell quite easily and brings up the possibility of 50MA as buyers are in ‘No Rush’ as titled yesterday.  This dip is looking more like the November one to 50ma eventually instead of the January one.  Short term- Saudi Arabia is the wildcard noisemaker here, if this turmoil doesn't spread there, SPX 1295-1300 cluster of support may hold.

Shadowlist

• Commodities –  Since noise is around $100 crude, it is surprising plays around coal are not being used.   Look for trading opportunities here on the energy play as this quiet reaction should change. (CLF, WLT, ANR ).  After peeling back sharply since mid-Feb, Ag’s Ferts were the first to see a buy interest reversal.
• Momentum/earnings/“winners of ’10-   Last week…".While some momo’10 names notably lag today in a melting up market, (maybe something to monitor for broader mkt)".  This has turned to not only lagging, but selling in 2010 ‘winners’ this week and now this Q’s winners are hitching a ride.  Hope is PCLN  EPS reaction AMC generates some buy interest on this pullback.

Cluster held..

Following 3 premature and/or botched bounces this week, the market finally found the ingredients to make a bounce last.   Why?.  Firstly, no sideline money coming back (‘No Rush’), secondly no shorts in the market to create a short covering rally of substance for those 3 earlier attempts!.   The combustion needed simply was not there, folks. Let’s get to this afternoon,  it wasn’t crudes fall as reported to ignite the move as it was falling all day off overnight $104’s and the market had done nothing except sell off more.   It was smacking 1295 SPX more than anything that set this move off. (see yesterday’s cluster note).  Afterwards > 2pm, crude fell more and that’s what got some more conviction buying / covering going.   Look at the Shadowlist (site attached) snapshot taken around 1:30 just before the market fell hard to 1295.  What do you see?... No selling in individual stocks on the Shadowlist and thus a ES sell trade.  This was not a list indicative of a market falling through Dow 12000/SPX 1300.  As the market dropped to SPX1295, our stocks didn’t budge in a seemingly panicky moment at major support.  Selling had clearly stalled this morning off Saudi Arabia sentiment of this contagion not spreading.

Looking ahead, the market broad following this afternoon is an 'Oily hostage' to the price of crude as it will dictate the broad market/SPX moves.  Likely finish the week below 20MA, so hardly out of the woods, but indvidual stocks/ sectors should have better sentiment/oppy's to trade after this weeks woodshed moments.

Shadowlist

• Momentum/earnings/“winners of ’10-   yesterday..”Hope is PCLN  EPS reaction AMC generates some buy interest on this pullback”. Clearly, this helped abate the selling and generated a bid in ’10 winners names like FFIV APKT RVBD, all >4-6% and ‘11’s  standouts like JNPR.
• Q4 earnings update – Another positive for market was the ‘v.good EPS reactions’ continuing as we had 3 DJIM stcoks report well, GTLS +>13%,  PCLN >6% , SXCI  $44 to 49’s , >6%,  all excel and produce nice runs in a selling market.  This again proves the premise of trading EPS reports this season and ignoring the broader market.

below: Intraday Shadowlist components

DJIM #9 2011

Entering last week’s shortened trading calendar, DJIM noted Libya  vs. Egypt..” This time we are dealing with tensions hitting the first ‘oil’ producing country and so it might be a little different this time due to 'inflation' links”.   Despite a global overnight sell off leading into the US market open, the SPX managed to open at 1338, but soon after almost 3 full days/3.7% of selling ensued.   As discussed, investors/traders would not be willing to step up until things settle down.  That’s what occurred as S. Arabia stepped in late the week with a social $blns program + to meet crude demand to ease jitters.  Coming into this week, the consequences of this Oily patch are not going to go away overnight and the markets will also have some of the first February Eco’ data on it’s way.   Add some ECB events to monitor and the belief is this bounce will peter out and we will have November (see last weeks Jrnls) like action.  

Despite the ruckus last week,  we know that whatever is left of earnings reports this season, the reactions to good reports is still in the market and so individual trading oppy’s should still exist.  Just click the earning link here and see if any DJIM’s are reporting as a start.

Hardly a 'clean' day

Just as you’d like a ‘clean beat ‘  from a reporting EPS stock,  you’d like a  ‘clean UP’  broad market day. Today, despite a >7pt. rise in the SPX,  the broad market tape was hardly clean.   What’s interesting is during the 3.7% slide last week, defensive stocks never got a bid, but today as the market continues to bounce, it is the Utilities, Telecoms safety trade that leads.   Add in to the equation high growth winners that went back to being sold off (CRM FFIV NFLX AKAM CMG and many more) and you question the validity of this market gain or simply ask what it might be telling you.(only AAPL bucking trend, but that’s co’ specific newsflow).  Tomorrow is the 1^st of the month and as everyone all the way to Timbuktu knows this is an ‘up’ day since last August, including many >2% days.   If it wasn’t for this market almanac fact, a down day would be the expectation following a tape of this nature.  It still might be if crude stops easing.

Shadowlist

• Commodities – Shadowlist updates have been few since the start of last week’s noise.  If there is a trade oppy’,  it continues to be in this space as last note pre-Thursday trading day.  Ag’s ferts  (NEU, POT) bounce for 4^th consecutive day and CLF  is the outperformer low 90’s to 97 in the coal space since.(KOL-ETF, flirting with February highs) space since….”As all noise is around $100 crude, it is surprising plays around coal are not be used.  Look for trading opportunities here  on the energy  play as this quiet reaction should change. (CLF, WLT, ANR ).  After peeling back sharply since mid-Feb, Ag’s Ferts were the first to see a buy interest reversal.”
• Momentum/earnings/“winners of ’10-   As above,  the high growth space is a concern as this lagging space had a few decent days since PCLN  eps, but now has gone back to pre-PCLN earnings ways.