Buy stops kick..

Even before the first influential EPS report this week,  the storyline started to change premarket to a corporate driven one by MW's CNBC appearance, upgrade to GS-bullish preview of bank earnings.  We just said the market must first jump over a hurdle this week with the Banks-Brokers reports and today it got a flying start as it jumped a couple of hurdles at once.  This is good as there will be some messy reports from the group upcoming to not let this short covering move get too far out of hand, too quickly.

Still, this was not what really caught our eye!.  What was equally or even more important was the market's and groups ability to shake off and not wallow in the CIT  unfolding debacle in front of it's eyes.  This CIT liquidity crunch has all the potential to remind the market participants the Credit crisis is not really over.  Will this giddiness last, will the market continue to brush this off or start to worry about this and/ or other potential pitfalls.   As swell as today was, we have to monitor this star crack from becoming a big crack on the markets windshield.   Sentiment can change quickly, we just hope we can move forward from the same issues that broke the market before and concentrate on earnings. The market seemed confident in the gov't solving this problem for today.

At the open,  the CIT fiasco had a tug of war with Banks- brokers news flow, but managed to stage a bounce off lows in the 200ma range.   Last week, we pointed out in an alert to watch SP futures at 884.25 levels for a possible rip due to what we saw as a potential kick off of buy stops on a future re-test. 

As you can see by the ES and SPY charts (by volume spike) below this is exactly what happened.   If you weren't following our lead and or just blinked, you missed the DJIA pop 50-70pts in seconds as these buy stops- covering ignited a market breakout all the way to 901 by close.  At 894, we also put to rest the H & S formation for the time being.

Also important today was some individual stock musings (many from our shadow list) that included earnings, upgrades, estimate revisions and contract news to set a positive tone going forward.  Some include, PHG for earnings,  BBY ROK KFT GOOG upped and/or raised,

DJIM's …GS ARUN PENN LFT raised and-or upped,  STEC  28mln contract, WMS  (Ohio legislation news), helped it make 10% (low 30's to low $33's) since last weeks alert.

Well, it seems waiting with powder for "July 13th or so" wasn't such bad idea recently. Still, we've got a long ways to go (99%),  hopefully, full of good surprises as today.

Emotion dictates this trading day

In a battle between technical trading and emotional trading, the latter "However.." underlined yesterday seems to be the decisive winner today. As we mentioned on the weekend, the technical-centric kind of trading environment prior to this week may come to an end as the storyline changes to corporate report dissemination. When an earning season starts, all we need is a few big earning reports to kick start the momentum. We often say that market is rarely wrong. In fact, market is never wrong. How traders interpret market action will determine their own trading strategy, and hence, their trading outcome.

For a while prior to the earning season, we were saying a pullback is just healthy and just plan for the week of July 13th. We were also very selective on playing the dips. Techs/China earning plays were our main theme and they have done very well during the past few sessions. We came back to RVBD, STAR alerts yesterday and today they were positioned just right in the tech frenzy adding ~7% at their highs. Going forward, we still feel that the best earning surprises will come from the tech/China area. What's also particularly intriguing for this quarter is that many company's estimate are sitting at a reasonable(low) level. Investors/Traders' expectation may be high for many stocks out there, but the only thing they are comparing their expectation to is the current estimates. Therefore, we feel that this is definitely favouring companies this quarter. Another reason for potentially upside earning surprise is the companies' with the biggest international exposure  being the winners. We know that INTC sold a lot of chips in China. For some reason, our analysts were so obsessed with America's economy and job number, they seem to understimate the potential business from Emerging markets floating US companies. This may be partly the reason why analysts missed the mark on INTC's earning. Of course, this is INTC and we can't simply derive this conclusion upon every other company out there. However, this is a legitimate edge we have to use to gauge the overall earning trend.

Recall, we said heading into the week..”We think many companies misjudged the potential of a fast recovery and will have to improve outlooks. Billions have been added in EM GDP in the past Q with Industrial production leading the way. Companies in the SPX should see this in their top and bottom lines and sectors- stocks with the most international exposure will likely be the winners, notably technology, materials, industrials”. It’s clear these 3 groups led the charge today.

Tomorrow we have JPM to report and this is a crucial report. We should have a first glimpse on the operation of a big domestic financial company during the last quarter. JPM is much more important than GS simply because JPM's business is much more diversed and deals more with the consumers and small business. The sector jumped a hurdle or two Monday, but we don't doubt there will me a messy report or two down the line.

Other notables, NVS, MAR, IBM, NOK, PPG, HOG, CY, BIIB, GPC, BAX, APH, GOOG, PBCT, FCS, ERIC

Simply,  We said we'd be 'bullish' over 900 once again, last 3 days and bull gap pretty well confirms in our minds we hit a summer low at 869.  Why? The breadth Advancers/ Decliners, 3 days straight is too good to ignore.  Todays gap to 910 and 911 vicinity June channel top is our support/buy dip view now.  Today's action has thrown all TA and just casual market outlooks going forward for a loop we'd think, every short & long TA prognosis seemingly needs to be revised now.   Even those long term investors on sidelines this summer waiting for mid-low 800's will have to rethink now or possibly suffer from PA.  This includes every manager calling for this majority view when everything was seemingly falling apart since NFP report.   Once June congestion area absorbed (this will take some summer time), 956 high will fall as long as we hold todays gap /911.  Yeah, we're living in a 'Field of Dreams"..so far, so good though since this weekend's reference to it.

As powerful as the last three days have been, we feel that we definitely need some cooling down in order to further the advance.  In addition, we need more evidence that more companies are doing better than what analysts/economists fear. After all, this is a confirmation quarter and there's a lot of stake on the table here. We're still only in the first inning of reports. A good string of reports will not only bring more market participants back into this game, it'll also help consumers' confidence as well. It's just an inevitable chain reaction. What we may see here is those on sidelines begin to feel performance anxiety(PA) and chase. We got a glimpse of it today as volume increased and tonight some are feeling the symptoms of PA, thus, any pullbacks will be buying opportunities as long as the reports are above average.

Bottom line, there's no need to be bothered or buy antsy tomorrow if you haven't made a killing last three days. This week has caught most of the market off guard, yes..both shorts and longs. Only big difference is shorts got shampoooo..'d in the eyes with the H & S formation and lost a ton, while longs just don't make that much unless they speculated the farm into earnings. We have made some small gains here at DJIM and we feel there's lots more setups to come, most importantly, we're here for new fresh meat off earnings and don't want to get into guessing day to day moves of the SPX/SPY.

...little blue pills

We’ll keep it tidy into Friday’s trade as there is not much we can say,  we haven’t said the past week or this month at lows.  We’ll ignore the Roubini wire cross (later rebuffed) that was credited with the 130pm lift off.  We saw other positives earlier (neg headlines..NOK EPS  shrugged off, CIT  noise again muted) and just before the wire cross (FDX  exploding over 200ma).   Besides,  what anyone says at this point is irrelevant to us!.  Why?.  We’ve believed one thing and we’ve stuck to not being held hostage since NFP report that brought down the house of green shoot cards and pessimism spread like wildfire..we said starting July 6th…“NFP…only a cautious bump as the world’s economies are not held hostage by one U.S payroll data point.  The manufacturing output bounce is still the focus with earnings around the corner to potentially carry weight for the recovery”.  So, nobody can say anything about recession, recovery blah blah…to change our minds and how to trade in the meantime.  In many respects, our 'The Premise'  trading methodology is stll holding true from late March.    If we had swayed any with the market pessimism at/near July lows, we wouldn’t have said what we said in (DJIM #28) and therefore, prepared for what has ensued this week.

A side note...It’s interesting and a good exercise to go back now to around July 6th and see how things played out… a standard correction of 10% on the dot to 869 the day after we noted such, the 2nd re-test of 869 mid day soon and that ‘Golden Cross’ thingy.  You only learn from experience as with anything and we can only say that we/you will and always respect some of these historical/ technical lessons 1-10-20 years from now.   One thing is to read hundreds of pages on trading, another is to experience to them first hand!.  Speaking for myself (Demi), I’ve never touched a trading book,…just picked up pieces off the street you can say, including off Jon and BT.   It’s the StreetSmart's trading book you can say, you’ll probably become a better trader off a psychology book(s) than any trading book(s).

So..what we’ve seen this week is corporate reports not  being hostage by a single July NFP report.  Why would they be?  Think about it logically.   The reports keep coming in solid as witnessed AMC today.  It’s been a steady stream.  China GDP  didn’t slow down last night because of NFP, did it?.  The breadth of the market has been a key to watch on this move, 4th impressive ratio today.   Performance anxiety(PA) pill is working!!.  Strong equities= weak $USD= commodity linked trade (even though, we think coal linked are due for a whipping down the road because of energy divergence).  Of course, China data helps commods as well.   Only slight negative is the move in afternoon was a SPY-ETF's-SPX fut motivated move with little participation from individual equities, but on the other hand individual stocks should digest some of these gains.

Oh boy...would we love a pause, a pullback now, but the market is overdosing on those little blue (PA) pills and wants to go all night and day, so who knows!  We'd continue to love our techs on some weakness from last Q..notably STEC  boom boom today..RVBD, STAR.   So far in this Q, ININ , didn`t need to consolidate as it's got caught up in the mkt tape, we had CSIQ  in forum premarket at 13 pop 8-9% for a quick trade.   HITK , only drawback is its a pharma and those usually dont' have a earning momo' shelf life, but in this market going forward, you may well be able to sell " **** in a shoebox" and get away with it.   We'll see.   Anyways, we're going to be more selective now (go earnings plays forward or scattered fast trade ideas like CSIQ) and go bigger in size on less plays to take advantage of the exuberance.  This way any real market quick downturn here will not include our cash profits.   Simply,  if we get a small cap earning surprise, it should not matter to that stock if the market is down 300 pts at the open or AMC when it's report is released.

Unfortunately,  if mainstream media-analysts get bullish now, we'll have PA investors jumping on the bed, climbing, chasing the SP names and so who knows how fast this emotional trading takes to break 956.   Most importantly here to us is the mood has changed!!.  This is all we ask for going forward as summer lows might not even be 869, but higher at that 884SPX futs level we busted the other day.  A good mood will pay dividends to what we eagerly await and that is the best part…micro small cap earning play possibilities, which will slowly start to come out as we go into July end.

Pints on us!

The solid earnings calls keep coming and the SPX keeps trotting along.  What else is new?.   To tell you the truth, unbelievably the short term outcome of SPX near 2009 highs is of little consequence to us at this stage.  Yes, that’s all the investing public is talking about as we close at a SPX‘09 high, we admit to hardly even glancing at SPX, SPY trading today.   All we see at DJIM is how well our shadow list is behaving and preparing for opportunities ahead for more Pint sized earnings on top of last Q's winners.   Okay, maybe not looking at SPX had to do in part being occupied with watching our premkt HGSI   forum post call at 3.5mln shares/ $10 that sprouted to 123 mln shares traded and a 25% gain from those levels.   But seriously, what excites us is not if the SPX breaks 956 intraday day high this week, but what possibly lies ahead as far as earnings are concerned.  What these solid earnings in the first week are telling us is we are going to get some nice EPS winners in the next 2 months.   Yes, 2 months because most Pint sized caps report for Q’s after all the Keg size stocks report.   Plus these Pint sized caps will have 1 to 2 months of better economy than the ones reporting end of June Q’s now, so earnings may be right out of the park!.  Also, remember half of these don’t even provide guidance which only makes an excellent past Q of relevance.  We should have much more than the (ININ  HITK ) so far this Q to play.

Back at DJIM farm today,  the  drunken’animals were running freely…just yesterday we said…“Even last week, we had past DJIM shadow-listed Q plays putting in new highs at some point ( STEC STAR  CVLT EJ   )”.   Today, we had a few more DJIM shadowed earning stars light up the sky, ( GMCR  PWRD  DDRX ) for 10-15% and some with new highs.  Nobody on the web can be beat that  "Fab 7”  for a few months now.  Also, if that’s not enough, recall in a Journal and later in Forum(06/24) we suggested a pre earnings move will probably come to Casinos after a member asked if it was a time to buy back than.  Well,  with earnings in a week or so these names eg  LVS, WYNN  are acting like earnings winners the past 4-5 days as prospects improve (may need a rest though).  

Even if the market falls into total darkness from something other than a solar eclipse, we have a ‘Premise’ here that's been working overtime since March and an easy to follow formula to stick to going forward.   Note, the "BAR' has been set high for the Keg sized companies by INTC, GS etc., so the big boys ahead will need to shatter numbers/guidance going forward for a great reaction.   On the other hand, if one of these misses it will lost likely be a very nice short quick intraday trade.  The good thing is our pint sized  earnings focus has "no bar" to play in.   Also, the probability a herd momentum mentality has set in and pints are the best way to cure any performance anxiety over one’s stock portfolio in years past.

Geez, just got all thirsty..luckily it's almost noon in London UK!. 

Cheers'

Tactical Orders...

By sunset,  only ammunition the Bears may have is the Bulls having some trouble penetrating last line of defense "956".   In our view that’s a like a military defense in depth strategy gone wrong as it’s delaying rather preventing the advance of the Bulls.   Basically, the Bear Front line fell back at our tactical call at 884 SPX futs  as buy stops kicked in for longs and shorts covering.  Since, the breakout,  the Bulls just penetrate deeper and deeper taking no prisoners and just causing more Bear casualties while reinforcing their own forces as seen by the A/D line all the way up.   The only thing this recent slow grind in 940’s -950’s is doing, is grinding away at the Bears morale with each passing earnings day.   There is no counter attack plan yet for the Bears and the Bull army just needs a signal (one new catalyst) to advance.  Only thing that could go wrong is if the Bears can build fortifications here because they are given enough time by some of our seemingly lazy sunworshipping Bulls thinking the job is done this summer!.  A slight problem we see here is the Bulls thinking there is some magical “884” repeat before buying in or they are waiting to pullback and reinforce.   Put on your helmets now, dammit!.   We don’t believe the same buy stops are here at these levels.  There's only Bear carcass left rotting up to 956.   The "884" was the beginning of the end.   That was the ‘Blitz’ this summer  and to be honest,  we have no plan to ‘occupy’ over SPX1000-1100 for too long during the hot summer month ahead.   Why?   Simply, we don’t want to create a  'bubble' market feel all over again and/ or bomb to destroy and rebuild the Streets we’ll call home one day over SPX1000++ all over again in the future.   We want a clean surrender in the latter half of the year.  We don't want to torture our Bear prisoners, we want what they have left in cash on our side by than!.   We rather tease and give them a Q or so to build up some tanks, planes, trains and automobiles, but they’ll only be shooting themselves in the foot as they’ll be helping our planned worldwide IP (production) pick up.   This way we’ll have whole new battalions of commodities links to help our technology foot soldiers that are making mince meat out of them now with our Chinese allies!.  By than our woman and children will be shopping again with the money we send home!.

In the short term,  if the Bears want to attack in the way of a corrective dip strategy, well, we’ll have a counter attack waiting for them in the way of our sidelined cash reserves’ ready to build an underlying bid for us at 927-934 support.   Some eager Bulls may want to get on some Bear blood even higher at 941.  We'll call it our " 7pt dip " ladder step plan to buy, if a PB occurs.

Okay, gonna put away the toy soldiers now…see ya’ on the battlefield, you know the DJIM plan…attack the strongest and fittest outfits…just throw money at them and they’ll be yours!

"Buy Stops kick"...rip alert prior to start of July 13th rally

Daily Journal subscriber excerpts from rally beginning before 884 ES SPX  breakout  to another SPX new high 979 SPX cash  by July 24th close!. 

Our focus : US MID-SMALL CAPS, IBD 100, MOMENTUM STOCKS/ SECTORS, see post below of some stocks heavily played at DJIMstocks.com last Qtr.into this Qtr. (STEC, DDRX, EJ etc.)

July 10th.....SPX cash close 879....

"...The SP futures hovered for hours around 883,  watch 884.25  as this resistance area comes with buy stops. This may lead to a pop if busted when re-visited."

Heading into Monday, July 13th trading week,...

"...So far July has been a technical driven market,  the storyline should begin to change this week as we hit ‘EPS’ season......Away from the majority coming into this,  we think this market will only face ‘green’ when it’s all over with and the market will be higher than where it is now.  We are bullish on what might be in front of us.  We’ve had a correcting market as pessimism has grown out of a disappointing NFP and consumer confidence numbers recently, we think it’s been a timely correction as this may provide more upside as better outlooks will surprise those doubting a worldwide economic turn is here.  The US consumer will eventually come around. "If you build it, he will come",  we hear those whispers in our 'Field of Dreams'.. We think many companies misjudged the potential of a fast recovery and will have to improve outlooks.  Billions have been added in EM GDP in the past Q with Industrial production leading the way. Companies in the SPX should see this in their top and bottom lines and sectors- stocks with the most international exposure will likely be the winners, notably technology, materials, industrials.....`

"...Let the 2009 summer games begin with the passing of the torch from a technical to a corporate driven market."

As it has turned out most traders living by TA only, got burnt by July 24th!

July 13th close, closed SPX 901.... 

"....If you weren't following our lead and/ or just blinked, you missed the DJIA pop 50-70pts in seconds as these buy stops- covering ignited a market breakout....

Into July 15th, SPX at 905....GS earnings / INTC followed up AH's

"...Howerever, we have to remain open minded as this market can trade in a very emotional way  vs. technical  this earning season,  but the reports would need to continue...

Into July 16th trading day at SPX 932..

"...... Simply,  We said we'd be 'bullish' over 900 once again,  last 3 days and bull gap pretty well confirms in our minds we hit a summer low at 869.  Why?  The breadth Advancers/ Decliners, 3 days straight is too good to ignore......Today's action has thrown all TA and just casual market outlooks going forward for a loop we'd think, every short & long TA prognosis seemingly needs to be revised now......  956 high will fall as long as we hold todays gap /911.  Yeah, we're living in a 'Field of Dreams"..so far, so good though since this weekend's reference to it.

Into July 17th....SPX now at 940...

"....We saw other positives earlier (neg headlines..NOK EPS  shrugged off, CIT  noise again muted) and just before the wire cross (FDX  exploding over 200ma). ....We’ve believed one thing and we’ve stuck to not being held hostage since NFP report that brought down the house of green shoot cards and pessimism spread like wildfire..we said starting July 6th…“NFP…only a cautious bump as the world’s economies are not held hostage by one U.S payroll data point.  The manufacturing output bounce is still the focus with earnings around the corner to potentially carry weight for the recovery”...... The breadth of the market has been a key to watch on this move, 4th impressive ratio today. ..... if mainstream media-analysts get bullish now, we'll have PA investors jumping on the bed, climbing, chasing the SP names and so who knows how fast this emotional trading takes to break 956.   Most importantly here to us is the mood has changed!!

Into Monday July 20th trading day...at SPX 940 

"....We've been working on this trend really ever since the TSY news back in late March. This week so far has just reaffirmed that thesis and what happened this past week has reaffirmed our recent thesis that one bad US employment report is not a disaster for companies here while we had a thriving Emerging market.."

Into Tuesday, July 21st trading day...SPX at 950

"...The solid earnings calls keep coming and the SPX keeps trotting along.  What else is new?.   To tell you the truth, unbelievably the short term outcome of SPX near 2009 highs is of little consequence to us at this stage.  Yes, that’s all the investing public is talking about as we close at a SPX‘09 high, we admit to hardly even glancing at SPX, SPY trading today.....Back at DJIM farm today,  the  drunken’animals were running freely…just yesterday we said…“Even last week, we had past DJIM shadow-listed Q plays putting in new highs at some point ( STEC STAR  CVLT EJ   )”.   Today, we had a few more DJIM shadowed earning stars light up the sky, ( GMCR  PWRD  DDRX ) for 10-15% and some with new highs.  Nobody on the web can be beat that  "Fab 7”  for a few months now.  Also, if that’s not enough, recall in a Journal and later in Forum(06/24) we suggested a pre earnings move will probably come to Casinos after a member asked if it was a time to buy back than.  Well,  with earnings in a week or so these names...

Into Wednesday, July 22nd trading day & alerts during day, SPX at 954...

Journal title, "BULL ECLIPSE"...

"...of the rarest moment as well.    Yes, we are up again and perhaps it's getting a little tiresome?   Not a chance! :)   The only type of traders who are tired of our current rally are either in shorts or are in cash.    In fact, by visiting a few Bear blogs, you'd be able to find a communities of traders who are filled with disgust and anger with this 'Bull eclipse'  over their Bear dens.    Fortunately, they are the minority at this point, many are just a furball of their old selves and others are in the closet crossdressing as we speak.......Yes,  the market has been up for more than a few days too many and we may very well pause here for a pullback.   So what?  The Bulls are in charge.  This current rally is the result of people believing and acting that things are improving from credit to corporate.  Yes, the consumer in US is behind, but as recently quoted here, "Build it, he will come".

Alert mid-day....

Later...."Breaking over 956SPX at some point soon,   the big difference now to June 956 intraday high is the one indicator we've been noting for this rally.  The A/D breadth (advancers/ decliners)  line is much better!!.  As long as it keeps up, we'll break 956"

 ..another alert to subs'...Consumers finally playing along today, biggest positive for higher. 

Into Thursday's Breakout (956) day,  SPX closed previously at 954..

Journal titled, "TACTICAL ORDERS"....

"....By sunset,  only ammunition the Bears may have is the Bulls having some trouble penetrating last line of defense "956".   In our view that’s a like a military defense in depth strategy gone wrong as it’s delaying rather preventing the advance of the Bulls.   Basically, the Bear Front line fell back at our tactical call at 884 SPX futs  as buy stops kicked in for longs and shorts covering.  Since, the breakout,  the Bulls just penetrate deeper and deeper taking no prisoners and just causing more Bear casualties while reinforcing their own forces as seen by the A/D line all the way up.   The only thing this recent slow grind in 940’s -950’s is doing, is grinding away at the Bears morale with each passing earnings day.   There is no counter attack plan yet for the Bears and the Bull army just needs a signal (one new catalyst) to advance.  Only thing that could go wrong is if the Bears can build fortifications here because they are given enough time by some of our seemingly lazy sunworshipping Bulls thinking the job is done this summer!.  A slight problem we see here is the Bulls thinking there is some magical “884” repeat before buying in or they are waiting to pullback and reinforce.   Put on your helmets now, dammit!.   We don’t believe the same buy stops are here at these levels.  There's only Bear carcass left rotting up to 956.   The "884" was the beginning of the end.   That was the ‘Blitz’ this summer  and to be honest,   we have no plan to ‘occupy’ over SPX1000-1100 for too long during the hot summer month ahead.

Into Friday, July 24th,....SPX hits 979.4 previous day,  

Journal titled...A/D Expolsion...

"....Today (Thursday), this A/ D line exploded early. .... discussed the A/D breadth line not to ignore!...

..Bottom line,  we'll use the weakness from this MSFT  report to gather up some more positions.   Also, importantly, if you’ve been on our Bullish posture, which we said below 900 would kick in if we got back above, today was inevitable and sort of anti climatic as we hit 979.  Reason being is you’ve should have been making money while the market led up to this breakout, not Performance anxiety chasing to make a buck one day...."

DJIM #30 2009

Was a muted response (SPX up ~2pts.) to MSFT/AMZN earnings a surprise?.  Not really!.

Reason being when you have such strong breadth (A/D-NYSE was still 3 to 1 positive), momentum, new PA suffering money coming in the previous day/ week,  the market will not sell- off the next day!   Friday’s trade was more of buyers taking a break than sellers being busy.  Makes sense.  If you just got in the market, you would not be selling Friday.  Considering the action last week, an underlying bid should be present next week on any pullback as this type of buying pressure is not a one day, one week phenomenon that can't have legs.  They might not be runway model legs, but there's still some leg left.  Any pullback is a market  'breather' at this point after ~10% SPX in 2 weeks.   The week was not without negatives.  A positive is it seems any negative noise such as TXN, QCOM (expectations became too high),  AXP reversed , Banks was met with dip buying.   That is not enough downside risk to the market and therefore it was being bought by a prevailing underlying bid.   First support now raised to 950- 956 and we could use the ‘7pt’ ladder from last week’s Journal as the next support from 950.  Still note,  this rally is a recovery fundamental one and not a technical one.   Supports are only climbing day after day, so waiting for 2nd or 3rd support levels may be useless in the short term.

Something lost in the markets dissemination of corporate earning and thus rally was more global data points reaffirming our global Industrial Production recovery thesis.   How could SP 500 companies be beating forecast by over 20% (its not all cost controls) if we’re in a recession and not in a recovery? …Hmmmm

Holding into earnings,  just a reminder..we don’t hold into earning calls!.  If you decided to stray from this rule because companies were beating/ raising G,  you had cold water poured on you by Thursday with MSFT.  This rule holds especially with small cap stocks that we may have loved last Q.  You could be sleeping by a Riverbed come Friday morning if you held through for RVBD results.

Speaking of earnings,  last week we peaked with Banks-Brokers, Tech earnings in a few ways.  One is SPX made new highs and other is we peaked with the big important names.   We now go into small mid caps season and the timing could not be better considering everything that took place.   We recently said it will be small caps vs. big caps going forward and we believe this even more strongly now.  Main reason now is the RUT (barely pacing SP).  Also, short interest in small caps(RUT) is 3-4X that of SP500.   There is room on the upside here even if market stalls ~1000 levels.  The  mid/ small caps can do some damage here, this fits right into the DJIM niche.

Earnings dates link updated.

Update on Sunday, July 26, 2009 at 09:04AM by Demi/ YourPersonalTrader

Correction: RUT now barely keeping pace with SP500 after Thursdays rip. Considering they are 'higher beta' stocks, we consider this still a lag in performance.

disappointing..

Okay..only mildly disappointing…

You’re probably looking at the title and saying what was so disappointing about today, SPX up 3 pts day after the recent  ~10+% rise.    Well,  we’re not even disappointed that market was not up greater, we’re disappointed because we can’t get a decent red pullback to relieve the overbought conditions and let others come into the Bull playground.    You see,  we didn’t  have sellers today and we didnt have buyers even like us already on board the bull train to press higher or/ new buyers step up.   Nothing changed from Friday and the trading conditions noted in DJIM weekend report continued,  notably any weakness getting a light bid.    If you’re on a Level2 platform, you can clearly see a lack of any meaningful size bids or asks to make any stock move in either direction.    If something did move today, it basically reversed back due to lack of conviction.    A few DJIM stocks making intraday new highs are prime examples of all this, (excluding HITK )… ININ TBI SWI  gave back the new intraday highs and others with the real strong earnings like JDAS, ATHR AAPL  are just stuck in the Nazzy/ Tech oxygen tank after it's trip to the moon.  It's unfortunate as far as timing that the latter 3 gapped into the middle of the rally giving them little room to roam higher at this point.  All this just made for a flat boring day, but digestion is still better than indigestion! 

So..until one group gets aggressive, we’re stuck in what looks like June trading all over again.   It will probably involve a surprise catalyst to initiate a move.   Today,  some were saying it was a negative that we sold into the Home sales number,  but this wasn’t a surprise catalyst as in recent weeks the numbers, sector options action had pointed to this data.   It wasn’t enough of a catalyst for the Bulls to run through the streets and it wasn't really a sell on the news in our view
 
Positives to take away, include,  Financials strong in all sub groups  and TRANS  keeps rolling and a big part of this recent rally (recall July 16th we said FDX exploding over 200MA was a positive) and allowing rest of market to digest,  while showing this market is probably capable of rotation to keep on going forward.  In this case as NAZZY tech takes a much needed breather.  Bulls have time on their side!. Also, some M&A activity today maybe a start to some more good noise in this area.

Sticks and stones may break our bones...

..but foul Bear mouthed analysts, CNBC reporters will not break our 869 SPX. 

We picked a terrible day to have CNBC on during the trading day!.  Wow, the negativity of noise stemming from yesterday’s disappointing consumer confidence #, followed today by the Shang bloodbath,cover # of the Durable goods book,   followed by a 2nd weak TSY note,  followed by a Beige book that really looked like a Grey book as it gave nothing but mixed signals could have left even the seasoned long bull to throw in the towel and sell today, while we tested and tested yesterday's support bid at 869.  Tomorrow, we just may cancel our cable and go with the wire hanger for an antenna!. 

If there was one day, today was the day,  we could’ve been swayed to sell it.  We really felt alone out there ;).  As hard as it was,  we hung in there on our own views and continue to believe the last few days had some fat Bulls reloading for a move higher.   The nice close to ~875 just reaffirmed some of this and the post 4-4:30 pm spike in SPY had a 'Hmmmm' interesting green tone to it.    A big part of our reasoning of not dropping the ball today was the performance of the stocks we’re covering as they are seemingly more resilient than the average stock.   The only one that wasn’t was HITK ,  but that wasn’t a surprise as we warned for first time on it, heading into the day…“At this point, we do feel it may needs to settle down a bit.”   In typical past year’s EPS runner fashion of cheap stocks, it dropped like a rock sooner than later.  Also, we have no part in the markets poorest sector today which was hands down any commodity linked stock and so are immune to this action and noise.  

If we are right about Bulls positioning for another rip, we will form an outside of 869 Bullish month tape.  These latest days are the 3 flattest days we’ve seen in a long time,  this holds true for portfolio balances.   Unless, you're taking profits this week as some plays move to highs, your P&L probably goes back to flat if you wait because there's been no conviction yet, which we discussed earlier in the week to press higher.   Something has to give here this week,  if we can get through the next few hours and/or overnight without more negative noise than the supports built up last 3 days may provide trouble soon enough to the Bears as alerted in morning.

Update on Thursday, July 30, 2009 at 06:14AM by Demi/ YourPersonalTrader

Below are 2 excerpts following our minority DJIM view yesterday (visit site below today's Journal) from GS & NTRS on DG #'s, the premise of fat Bulls loading up for a passing grade on the number is probably evident here and by ES (SPX) follow through overnight after 'Hmmmm' interesting action just after close.

DJIM #31 2009

Every trading cliché in regards to ..'go away in May' and 'summer doldrums' has been thrown away in 2009.  But considering, we’ve gone through extraordinary times to the downside starting in late ‘07, we shouldn’t be surprised that none of the past cliches have held to form as we enter the month of August. We concluded July by painting a Bullish outside month of 869 on the monthly chart and we should try and break 1k early next week just because of this fact.   At DJIM, we had a successful July calling 2 breakouts, one was the break of 884 ES to start the rip and one last week to take out the Bears last line of defence this summer at 956 to come arms length of SPX1K.   Now entering August, we feel most of the work on the broad indices may have been done ST,  maybe one more push and break of SPX 1k like we said Friday to ..say to 1014 as 1st possible R before a market reversal.   In our view, the SPX is setting up to blow off some of the premium steam  after it breaks 1k into the employment report week.   Before or after the report, a good or bad report is probably going to be irrelevant.  It’s just going to happen we think.  

Considering, we’re not invested in high beta names now, like commods, casinos, we aren’t going to be too worried if a ST top occurs or if the market just motors up because we’ll be should fine with stocks we are closely following and trading. 

EPS stocks like FIRE  initiated on Friday, it jumped another 5% after posted and naturally settled on some profit taking after a 2 day run by close.

As we’ve noted in Journal recently,  we don’t plan on occupying a level over SPX 1000 for too long this summer, we prefer to make a strong bid to occupy the 1000++ for good in the latter part of the year when a powerful growth spurt will finally be evident to all, including those who are still Bears now.  We think rotation into and leadership will be from the Banks-Brokers later in the year to signal the next move.   This 1000 level is pretty well priced when you take in consideration a stronger than expected EPS season so far as a reasonable multiple.    It is hard to imagine a late summer-early fall overshoot, but these are not normal times and upside risk remains for anyone not participating or on the wrong side of the trade so far.   Fortunately, we don’t have to worry about all this,  life just goes on as we’re about picking stocks and we just need a few like STEC, DDRX from last Q this Q to trade for the next month or two.   So, as we enter August, we’re not in a position of Performance anxiety like many out there and can almost relax after being on the right side of the trade for months now.   We think the upside is limited here ST for the broad market in August, but not for individual plays as we enter the July Q end earning reports that kick off with CSCO on Wednesday night.   As we’ve been saying recently, we favor small caps over big gaps as a general tone for the market going forward and this plays right into our DJIM niche, if right.   The premium is pretty well used up now for the broad market, but this premium is probably going to be there for the taking as the mid-small caps reports continue to flow in August.

''I go 1st..you go 2nd....and than..

...I go again!".  That's the 'Bull' transcript according to our DJIM spies.  The Banks- Brokers start the rally in March, the Techs follow and than snooze after MSFT earnings and than the Banks- Brokers take over again!.  The question is if the Banks- Brokers are really an impatient bunch and want to get this next leg started a little early?...

So..a few ‘ bullet’ points on market action , it’s quite simple…

We’ve been saying, including last before Monday‘s move over 1K, ….”we don’t plan on occupying a level over SPX 1000 for too long this summer, we prefer to make a strong bid to occupy the 1000++ for good in the latter part of the year when a powerful growth spurt will finally be evident to all, including those who are still Bears now.  We think rotation into and leadership will be from the Banks-Brokers later in the year to signal the next move”. 

Guess what’s happening?…In just a few hours this week,  we’ve had global PMI numbers that give credence to a ‘powerful growth spurt’ in 2H2009, which is now scaring away the shorts from pressing new positions.  Shorts/ Bears don’t want to get run over by the growth train money flow that is entering the market just now and we are seeing rotation into the Banks- Brokers occurring the last 2 days (XLF new highs)!. 

Don’t get us wrong,  we love the idea to go higher this summer, but this is a tad early in our view if we want to see and think we'll see in '09 (SPX1100-1200)!.  We have another 15-20% leg from the SPX to use up later this year, we feel.  But, talk about exuberance now!.  Market is acting like 50% is not enough off lows, let's go for 70% now without a pause.    The question is.. will we have to move up the dates of another leg up in our playbook.     It's hard to imagine an overshoot late summer-early fall,  but as we said these are not normal times we've been through, so upside risk remains for shorts and those not participating yet.    As long as we avoid, most notably an overshoot gap open and/ or spike soon,  it would help avoid the beginning of a good size reversal.  (1014 was the level we noted here as possible 1st R, hit ~1007 today).  If we keep inching higher, it will be beneficial for higher highs into late August and back to skool days.    So far, once again the market is showing and underlying bid and resiliency even as we hover around 1k, we watch the A/D line on the NYSE closely. 
 
Also today, we had some life in the mid-small caps and earning reactions were very good (WMS CTSH EMS ).  If this continues we'll feel much better that this is not a short term topping out process as discussed yesterday. 

This is a telling week, just keep an eye on this bank- broker rotation follow through, renewed strength in mid-small continues along with a healthy AD line to power this market higher or not.

DJIM #32 2009

After a few days of some seemingly stiff resistance or maybe it was just waiting for NFP report, the Bulls used the Bears biggest nemesis during this rally to power to a new high of 1018.   The Bears nemesis since March is improving economic data and Friday this time came in form of the NFP.  One plus one equals two and since March the market is in hyper drive as 1)improving economic data and 2)earning forecasts equal rising equity prices!.   As long as this continues,  we have a chance to see the market near 1050 by Labor day.   The only negative is what we first said coming into week of Aug 3,…“..one more push  ….say to 1014 as 1st possible R before a market reversal.   In our view, the SPX is setting up to blow off some of the premium steam after it breaks 1k into the employment report week.   We hope this is not the case, but sellers did come out as discussed in Fridays Journal and market failed to close over 1014 (8pts below high of day)

Even though we didn’t gap spike open (our fear for reversal), we did have what many would call a spike as we had traded 991 ES futs before the report.   We will point out to a low Nasdaq volume day and GS action as negatives.    We did like that SP 600 and mid cap SP outperformed rising  ~2.7% each while the majors were up ~1.1-1.3% on average.   Of course, we like this as this plays into our niche and avoids being too glued to SPX action day to day.   The healthiest thing the market can do this week is blow off some steam as bullish sentiment is very high.   A broad market stall should still allow for some individual stocks picking, sooner than later money flow should come to the worthy mid-small caps.

A slow eco data week, the most notable will be the IP/ retail sales which is expected to post large July gains and FOMC meet.

...How'd we get here?

‘Here“…is seemingly nowhere as we sit below SPX1K again and many jumping on the train last week are asking this question.   Before the 1st trading day of August, we discussed a break of SPX 1K was inevitable after painting a Bullish outside month to conclude July.   Once we accomplished this feat in short time, we immediately warned that an overshoot spike would be the beginning of a reversal if 1014 was hit and the market would “blow off some premium steam”.   Since Fridays intraday high spike to todays low..(26 pts < 3% has been blown off).   Today as the SPX futs touched down to 990/ 993 Cash important support, we were in danger of this reversal continuing to next 982S and than even 970S later on.   Simply,  we feel stops are laid out just below 990 and this would induce a further drop.   We’re watching this level closely this week,  today’s volume was quite low in all probability awaiting FOMC.   FOMC, not much is expected,  still it should swing the market either way just because we sit at support.

The Friday SPX failure to close over 1014 is reminding us of the June attempt to get over 950.  A break to SPX 956 and than a close of 944.  We think the trade going forward may resemble the aftermath of that day.  Have a look at the daily.

What’s important to understand for future reference are some points to recognize as a trader to be a head of the curve.   Once we broke SPX1K, we titled a journal “ PMI= SPX1= Market too Giddy”.  That day global PMI pushed the market higher as all of a sudden these PMI’s were the holy grail as seemingly every  Johnny come lately’ was coming in bullish.   We wondered if this investor was really that behind the curve and now the smart money would begin to sell off to them over SPX1 (Aug 4).   This relates to the overall bullish sentiment getting too high, thus too giddy.   Other bearish points we have discussed recently are the mid/ small caps earnings winners not going higher which signals a short term top for us and most recently the failure of the COMP all leads to our cry here…’we want broad particpation’ and we’re not getting it.   Also our NYSE A/ D line is turning.

A few earning plays from this Q did look good today.  FIRE  continues to make new highs,  PWRD  made a nice one day reversal after selling off on excellent earnings.  EJ  beating on top of Aug range ahead of EPS.  ABVT, consolidating, flat lining well since EPS.  SXCI  and even STEC  is starting to shake off the offering.    But as noted yesterday, breakouts are a concern and just as we noted TBI  breakout was vulnerable as it gave it all back.   We’ll feel much more comfortable with our niche once this action stops. We also added some TXIC  today due to earnings, China and business related make the float even that more attractive to go higher.    Anyways, today a few more of our niche plays are looking better, hopefully a sign of things to come.

Today,  financials down 3% with banks down 5% being the weakest sub group, we have Tech doing nothing since MSFT earnings and Commods  needing a well deserved rest all intertwining here.   Not simple to figure out we need someone to pick up the slack.  

Headwinds comin' ..?

Surprisingly,  day after a rally you’d expect some downward consolidation to take place,  even more surprisingly is given a horrible Retail Sales the market set a new closing high SPX 1012, (yet not a new intraday high).   If there is a finally a headwind potential coming for the market,  it will have materialized from today’s Retail sales number as we look days/ or a week back from now.    Production is picking up, but consumer is a clunker still.   Remember what we said as a theme for the recovery....“ If you build it, he will come!“.   Well, ..he..she..they are not yet coming which is disappointing, we did not think we'd see a 5th straight decline.    Also, for the 2nd straight day there is a divergence between asset classes, importantly equities and corporate credit which is a negative as the equity market attempts a breakout, a breakout squeeze so far with not a lot of conviction buying.  In last weekends Journal, we talked of a stall to blow off some 'bullish' steam,  despite a seemingly volatile week we will probably accomplish just that to close off the week..a stall and consolidation period.

As far as sector performance, second day of leadership from 2 of the big 3 as Banks- Brokers and Commodity linked stocks.  Even Tech traded well, particularly the semi’s.    All commodity stocks we favor can be found on our shadow list, as always we favor X-CLF  for steel, WLT-ANR-MEE  for coal,  FCX  (copper) to trade.    As far as Ferts, bad news is being shaken off today suggesting all the recent turmoil with pricing affecting stocks may be going away . (POT MOS ).   A casino play here, LVS  squeezed today, but it didn’t cause widespread follow through action as usually seen in the group.

Some earning notables off DJIM,  noted STEC  starting to shake off its offering before Wednesday trade, well, did it ever making a NCH with a 2 day sprint.  Others on Journal this week, SXCI PRE MAIL FIRE TXIC  were all pretty solid.

..1014 was the new 950..

Nothing happened over the weekend and/ or overnight to suggest SPX ES would have been down 22 pts premkt.  Except one thing, the globe digesting the poor Retail and Consumer numbers in US over the weekend and acted by aggressive profit taking.   Simply, this was the primary reason for the follow through action globally and in SPX futures.  Even though we warned here the retail # might be the start of something we’ll look on after the fact as a summer top,  traders/ investors probably didn’t unload due to the market seemingly shrugging off the news in Thursday and Friday trading.  We also pointed out last week another negative we saw and this was highlighted in a WSJ article over the weekend (corporate credit trading).  Trading by our own guts last week instead of following market action would have suited us better.  

Before Wednesday trading….“…The Friday SPX failure to close over 1014 is reminding us of the June attempt to get over 950.  A break to SPX 956 and than a close of 944.  We think the trade going forward may resemble the aftermath of that day.  Have a look at the daily“.  (See chart below).   We are confident this is the case now, a summer top was put in that Friday.  Unfortunately, eerily,  short term the chart looks even more similar now and in the longer term post- Labor day positive.

So,  if you got stung by the gap down of 20pts on the SPX,  you’re not alone.   There is nothing you or we could do!.   We noted last week …“…the SPX futs touched down to 990/ 993 Cash important support, we were in danger of this reversal continuing to next 982S and than even 970S later on.   Simply,  we feel stops are laid out just below 990 and this would induce a further drop".  Well… they were hit before we got of bed and it took us straight down.    It was useless to sell anything into a gap that hits support levels we’ve noted of 982.   As far as we’re concerned,  any losses today are paper losses with the gap hiding 3 actual positives….Empire showing manufacturing growth was above expectations across the board,  NAHB housing suggesting gains in new home sales are still ahead and Master trust #’s.  Maybe the market will digest this overnight, today it was on one track mind ignoring everything positive after seeing a global sell off underway.   These might  not be overwhelming positives,  but they do make the Eco data interpretations that more confusing and unpredictable.   Before, we had positives (tailwinds), now we have headwinds and tailwinds making for an environment difficult for even the best economists to figure out.  

So, what do you do?.  We just hold the longer bull side as this is still 1/ profit taking 2/ shorts not pressing at these levels, upside risk remains for Bears.   Still,  unfortunately, we did have our summer top last week.  We would use any upside close to 1000 at this point to unravel positions unless some great eco catalyst appears.  We would have to digest the action if it gets us there, but at this point that would be the strategy.  Part of the thinking is shorts would begin to put on positions higher after missing this gap down.   Still, we don’t think any action up or down will not be too suggestive of things to come until we are post- Labor day as volumes will probably deteriorate in the next few weeks.  Today was probably a great summer sale on many individual stocks, not SPX.

Today.. supply showed up in small and large caps, nothing was saved especially the China stocks following a 6% decline in the Shang.  Tomorrow, some demand will show up, the question is how much and will answer how far we bounce.