.."Mayfest"

“…Europe was not in focus!.  Let`s hope this quietness remains.  But, like its EYJAFJALLAJOKULL neighbour,  you never know when it will erupt again and disrupt things. “…. 

Well..that didn't take long!

It’s irrelevant to discuss the specifics of the latest Eurozone (Germany..only blue eyed, blondes can trade) mess up, the fact is,  it’s something we’ll continue to deal with on daily trading basis as we did with our own mess in 07’-08’.    This doesn’t mean you can’t make money in this environment and that doesn’t mean shorting the crap out of the market.  Looking back at some of the past few trading years, some of the best were ‘07-’08.   Yes, on par or even better than ‘09 when ‘Joe the Plumber’ could’ve been a one hit wonder trading the market.    The point is consistency will get you further over time.  If you decide to change your trading methodology ie. try to short,  play the forex..you’re likely to get burned sooner than later in trying to take advantage of these almost daily ‘eruptions‘ in Europe.

Tonight,  we fill the gap all over the again and possibly test the 200ma as speculated the last few days.   All we could do is wait and see what materializes…One thing we do notice this week is it’s widely an ETF trade going on with minimal upside or downside to individual equities.   Of course, if another bout of panic ensues, this will change...but for now it’s a slight positive as money is not necessarily leaving US exposure stocks, but a fast traders market trying to take advantage of short term oppy’s driven by news flow.

...a bag over it's head!

...Ugly!!

Think we’ve covered all the bases this week and we’ll just leave a chart up with a trendline of importance in our view as it’s not only at plunge flash day intraday lows, but extends all the way back to late October to February to now. (#15 blue)

So, just like …( as we said about SPX 1100 before todays massacre )…It's really a question of when, not if!.    If all the levels of SPX seemed glass fragile this month,  who says SPX1100 won't be as well and we test flash plunge day lows!.” .      It could be glass…

Yes,  we can bounce from the trendline as we‘re down >7% for the week,  but, if today’s mid-day reversal got you all geared up buying,  you probably couldn’t believe the ugly ending to the day.    We did and we were cheering for it!.   Why?    It’s like a bad tasting medicine,  it will eventually cure you, Mr. Market.   We noted recently,  if you’re trading by what the Euro does,  you’re behind the curve.   Why would anyone chase today’s reversal off the Euro busting up and the same intervention speak from yesterday?.   A 2 day rip of 4% for the Euro and a crashing market, what’s not clear?.   Simply, we want a better reason to trade this market.   As of tonight,  we only see the same problems outlined in previous Journals.

Paring short covering gains..

Today was disappointing as the market gave no hints of follow through on Friday’s action or the fact this week is very light on eco’ data front.    It simply drifted down.   One, if not, the biggest worry is signs of slowing recovery following last week’s weak data outlined here, so this was/is the market’s oppy to bounce before potentially more weak (May) data next week.   It failed miserably today to take advantage of this week’s lull.   As far as follow through, today’s session was disappointing as it was too quiet (volume) showing buyers are not ready to step in.   So many individual stocks breakdowns are not being bought today, which is a major concern.   What potentially may add to selling is when tier1’s GS, JPM start to take down estimates due to slowing growth worries.   This may cause further exodus out of some sectors, individual stocks in those groups.  Fear is this may not be priced in yet by those still heavily invested.

All in all,  Friday points to nothing but short covering and our last chart on the journal’s pages may show the Nov-Feb trendline is ‘Glass'  with low SPX 1000’s in the cards this summer becoming a very likely scenario.   Next support will be Feb. low 1044.

Crazy and Crazier...

Yep, as in 'Dumb and Dumber'…'Crazy and Crazier' is this market’s motto!..  AMC, picked up a local Business paper, Globe & Mail (for once) and couldn’t believe the pages full of Europe, China and thus U.S destruction coming…page after page, article after article, left this trader in disbelieve of what is being spit from the mouth regarding this recovery.    Doom is seemingly the consensus!.   Look,  even if we think the market has a chance of low SPX1000’s (we already had 1040), it doesn’t mean there won’t be oppy’s discussed the other day of being very profitable in the worst of time,  even with a long bias!.    The summer has just started and that means we have June, July and August to go up and down and up and down and maybe hit those low 1000’s.   Even if it does, it won't necessarily mean the recovery is dead.     We can’t sit by and wait and do nothing!.    If we do, we’ll be with all the naysayer’s, the same ones we didn’t listen to from early 2009 and are not about to now.  Instead of reading another piece of financial ‘tabloids’ going forward,  we honestly will use our own Journals as way of not straying as we‘ve always do.    These daily musings keep us in check…inline, we go back and read what we had previously thought day after day..week after week.   When we thought a ‘sizable’ correction was coming in April, we followed the script heading into May as hard as it seemed at times not to jump knees deep in positions near 1200!.   The ducks were lining up if we go back and review beginning with the X  and such we noted.    Simply... point is days like this will make you go nuts and question even your fast intraday moves in the marketplace.   It’s crazy and will get crazier,  if all investors crater to the fears that are in the Financial tabloids day after day here in May.  

'Coulda, Woulda , Shoulda'  is something every trader lives with day after day with trading decisions, it is also the same words that might be muttered when SPX is >1230 by XMAS/ New year's.   At that point, we don’t want be saying,  we’ve been Dumb and Dumber!

DJIM #22 2010

Just because we get to flip the calendar page from May to June come Tuesday,  it doesn’t mean much in and to the trading world.   It`s not a new dawn!.  One thing we’ve always alluded to is bad news is usually saved post - holidays, notably Thanksgiving and Xmas, but it’s just as possible this holiday as well to keep in mind.     Despite all the turmoil early last week with possible capitulation occurring,  it seems things have gotten a bit to quiet end of week. (especially on the European front).   Hopefully, the quietness is a sign of some kind of stability and sanity beginning,  but it’s not going to be a 360 turnaround immediately in June.    We must understand money is unwilling to step in so quickly,  so we maintain the same premise from last week as in putting in toes in the market, but not diving in to be soaked from head to toe with holdings.   Let’s give the market another week and than be the judge.   What we saw last week 5/26 lows and/or from flash crash,  if  capitulation,  it needs time to work through.   This is just a historical fact, that markets don’t go V shape after such corrections.

Another reason for the week wait is something we noted to start last week and it deals with the possible ‘slowing growth’ factor.   Last week,  we said the market would have an oppy’ to use the lull week in eco’data as an advantage and it clearly did not.   This week is the important data.. a few ISM’s (may data starting Tuesday), China PMI`s, auto sales, retail updates, NFP#!.  Weakness will likely mean a step back in all respects for the market.

..It (eco'data) does matter!...

It’s not to so hard to understand where today’s ‘all day 2.5% rally' stemmed from…yep!..all day, as in a rally with a good open and a good close,  not one the gives up gains late into the close as Tuesday and last Friday.

We headed into the week bolding.…“This week is the important data.. a few ISM's May data starting Tuesday), China PMI`s, auto sales, retail updates, NFP#!.  Weakness will likely mean a step back in all respects for the market.”… Yesterday…after a miserable close…  "..but US ISM was “bullish”  for production in months ahead and was firing on all cylinders in May.   This ISM # should have eased slowing growth concerns for more than a few hours!.   Maybe it will (it should if #'s like this) once the comatose investor switches focus from all the shenanigans encountered in May.     Well, maybe today the comatose investor stared to wake up on the heels of the neglected strong ISM reading.   Follow through on eco’ data started with an upbeat pending home sales # and the afternoon,  SAAR auto #’s came in much stronger than anticipated as well.    The importance of this weeks data is it shows what was happening while the European shenanigans were going on in May, so far,  it shows US economy didn’t blink an eye to all the turmoil and possible effects across the pond.

So, a few down #‘s and a couple more to go this week starting with retail tomorrow.   In our view,  a weak retail and a very strong NFP# is the expectation now and may not be as important as what we already got this week.   It should be enough at this point to rally further into Friday post NFP#).  How far we get by post NFP# will depend how far we can push coming now to the critical 200ma (~1105) as the market does a re-test of a previous rally from 1040.  (Note..a catalyst not getting much noise today is very important and that is from an overseas overhang on markets.  Spanish regional banks were able to reach a deal on merger terms after talks for a few weeks and won’t have gov’t seizures as had already occurred earlier).  So, if Europe happy and U.S stay happy, together we can push through all the technical resistance up to and over 1120 eventually.

Positives are this was move was broad sector based and the close was pretty, not ‘ugly’ as Tues/last Fri,. broke thru 2 ’R’ levels at 1083  & 1095 and thus, we’re bullish thinking SPX, >1120 to 1150 in the making for this leg.    A good aspect to the broad rally is the majority of our listed high beta stocks didn’t get out of hand today.   The gains were subtle given the 2.5% broad jump and give an oppy’ to get some popular beta names tomorrow or set ups ie. DGIT, a stock we added to our list that is similar biz to VCI here………(or even better on pullbacks if given)  that are not extended due to one day’s action. 

DJIM #23 2010

…and the number is …?…41k private sec jobs!.  To put that into perspective,  Canada pumped out 43K!.   If there was any anxious money to come off the sidelines for this rally to continue over 200ma,  it was crushed quite handily.   Hands back in pockets.  Time over time, it seems critical “R” or  “S” brings out either a big negative or positive catalysts to allow for a breakdown or breakout.   This time is no different as NFP # expectations boosted by Obama/Biden boosting mid-week were seemingly a high probability.    The idea of this type of hype by leaders not coming to fruition is unfathomable and just an outright lie at this sensitive time.     Too bad this lie part of the equation will be muted out and instead something like Hungary’s woes, SocGen’s derivative rumors get used as part of the breakdown equation.   The Hungary problem was noise on Thursday with CDS widened out big, the big money was in the know and it didn’t do much selling on Thursday or overnight, the SocGen is probably just noise.    Despite the disappointment in the NFP# headlines,  there were underlying positives in labour income growth and workweek earnings increased for wage growth for the first time in a long time.  Of course, these figures only matter to the economists, the investor/ trader was only looking at the anaemic caution shown by employers to hire in the headline #'s.

The scope of the selling from 6am ES at ~1108 to 4pm SPX to below flash crash 1066 was a slow painful snowball as every sector was hit hard.  No mercy.  Unfortunately, the important groups in the market led the fall….Transports, Industrial, Materials  and unless this trend in the core groups changes quickly it could be signalling we test 1000 sooner than later this summer.    Simply,  there were no survivors on this day for any long holders.   After some consideration of the catalysts and the pace of persistent selling happening into a weekend,  we think it’s overdone giving probability to some buying to begin the week.   The longer term picture is more complicated. 

ECB  meeting this Thursday.  Recall last time they didn’t address concerns and we sunk as badly as we did Friday.   Let’s hope for something different this time around for market’s sake or we’ll have to pray the new Iphone unveiling this week will literally save the world… create jobs, stop contagion, cap and contain oil spills, stop potential wars, make soft landings in China!.

Shadowlist update

Shadowlist by sector money flow/ rotation to follow. (visit site).

..now just waiting on ECB

Most days we’d be thrilled with a 20pt SPX intraday bounce, today it’s sort of a ho-hum event as nothing has changed in regards to the spooked marketplace sentiment.   Technically, we bounced a few times near an important technical level and rallied some into the close,  but it wasn’t as sharp and decisive move as we’d have liked to see under such circumstances.   Still,  we’ll take any positives the market may give after the beatings of the past few days, especially for the Nasdaq which had been slaughtered until some relief came late in the day.

To gain some control back for the Bulls, we need to get over “R” at 1071 and than 1076.  We doubt investors will make too many bets ahead of the ECB meeting June 10th after their last fumble.

..... GO-aaaaaal!

In case anyone wondered why we ended the past 4 Journals with the ‘relative’ ECB meeting, the answer was clear as the 8:30 Trichet conference began!.  Chart of ES is below of the move commencing on the dot……

Just as we concluded our frustration sound-off last night wondering what a "relative" catalyst for this market is.  We had an answer.   By the opening bell, we had as many as 3 with a change of heart saying risk should come back and these will matter ("relative").  …Here they are again…

Risk should come back...these catalysts should matter

*China export includes a whopping US#
*China Pension...$114 billion National Social Security Fund, said euro will be able to weather the sovereign debt crisis; "I do believe the euro will gradually stabilize and survive the crisis."
*Trichet every word pushing euro higher/ SPX, calming mkts

Firstly,  we`ve been discussing the 'fumbling' of  Trichet recently as a cause for much of the heartache recently.   We concentrated on the ECB this week because in the back of our minds, he couldn't fumble again as he must have had some PR training by now or more like big money guidance this time around...."ECB  later this week… Something will give here in Europe this week and will be a positive catalyst for the markets or else"….. Just like Geithner had you may recall when he started at the helm.  It wasn`t the fact some wild solution, intervention of sorts would come, all he needed was touch on all the points (as he did) to de-stress the market and give it some calmness.

Secondly,  Even though the China export# was leaked yesterday,  it’s relevance all of a sudden became a catalyst and all the talk.    One thing not being mentioned about the number, including the fact it beat consensus by something like 16% was that US shipments rose 23.5% m/m and even Europe rose 19%m/m.    Importantly,   these are May numbers when supposedly the world was falling apart.   Clearly, it was not and China growth is not accelerating downward as feared.  Importance is this relieves an "overhang" on the market sickening it for 2-4 weeks.

Since the opening bell and right into the close,  the talking head guests were adamantly disputing this move.   Yes, recent volatility has the seasoned traders flustered, but the fact is they missed this move through many technical resistance areas.   It's probably unfathomable that we even closed at SPX 1087 for today's naysayers.  

As we said this week,  .."   To gain some control back for the Bulls, we need to get over “R” at 1071 and than 1076."    Well, we did this and beyond on a closing basis!.   So, besides being technically relevant, we think 2 major overhangs got a lift today (Europe/ China).   Not lifted completely, but a lift and that's a start for investors to begin starting to get off the sidelines.   Good thing is still today's move was largely ETF based, individual stocks have catching up to do.   Many are still you can say trading at 1040 levels.  This day and the catalysts involved will only last so long,  but we definitely think it will get investors thinking as risk is to the upside with many not positioned for it into June Q end!. 

All in all, today was a Goal for the Bulls and we can enjoy some World Cup footy action in some peace!.