..cheese steak or cream cheese...which will it be Philly?

Despite the calm rebound on Tuesday, our feelings that evening were SPX1K is seemingly ‘oceans away’.   Maybe, it was the overwhelming bearish noise that was circulating after the gap down, but as we said early this week, we should trade by our ‘ guts’..first and foremost and not to be drawn by daily market action or in this case noise!.  We have to keep an openmind and think things through.  By morning with SPX futs down 10 and erasing the rebound, we were looking at things a little differently.  Mostly,  because we were never bearish since March and so why are we being swayed with the tide in a day or 2.  

One thought was about ‘oceans away”..is it really in this market?.   What’s 10 points, 15 points as in premkt to 1K to this crazy market?. Hell..10-15-30 pts is a day in the park and it can be erased within hours or a day as this market is overzealous with 2 things now.    We still have (PA) performance anxiety managers/ retail who want to be the underlying bid and we have shorts now rubbing their hands at the opportunity to short more than we've seen in months.    So, we woke to an article stating the big SPY put action and “Bearish” headline and thought this is probably an opportunity to a squeeze coming.  Why?.  Well, we all know the Financials are a key and considering they are holding steady and had good news early this week, this combo with eager shorts may simply lead to a squeeze.    Even though we said ..“one day soon”, we wouldn’t have posted 10 am, if that one day didn’t include today.    It was funny to see media such as Breifing.com still scrambling for an answer to the squeeze a few hours after we posted..a regurgitated 2nd stimulus idea was the first, a dollar decline followed..etc.   That’s all hogwash really,  it’s purely based on market participant psychology, a squeeze that has no immediate explanations (catalyst) is always a 'short cover' move.     Your first understanding of this is when you look at your watchlist and see minimal gains or even still losses across the board.   If your list is spread from financials to commods to techs, you can easily see this play out.   Even energy related plays after a bullish morning number were hardly up.    So,  if the SPX is leading as it did today,  it’s a short covering move.   We’ve been talking about shorts needing to go higher to lay down shorts because 982 was not a place to start.  Remember, just below 990 SP ES had stops hit.   Well….what better place for shorts to start again.   Tuesdays trade provided some opp' to do this and so once we hit this area today, it was off to the races.   We noted shorts after being burnt last week are still vulnerable to upside risks and they know it.  They hurry to get out like today. 

Anyways,  this market is becoming a roller coaster as sentiment is switching seemingly on an hourly basis.  Since Friday, we’ve led you to 3 separate bounces here stating reasons why it was possible.  Unfortunately, we have no clue to how long they will last.   Tomorrow is critical for this 2 day move to continue and lays with the Philly Fed report, we think.   Not much noise about this number, but it plays into our overlooked Empire positive number early this week.   

As in today’s post,  we think a small gap in the morning is very possible to SPX1K area, as we closed above 993.  We also believe China will rebound off our market with stocks here playing some catch up to the SPY move.   After …it’s all in the Phily hands,  but Initial claims will play some role before the 10am number.   If we trade/ close over 1005 sparked by Philly, we may likely say good bye to 1014 as a summer top idea .   Hard to believe just 24 hrs ago, but becoming plausible.   Just as much is going back to 980 soon if the #'s disappoint.

DJIM #34 2009

As we enter the last week of summer trading, let’s literally throw out a few stocks market ‘almanacs’…”sell and go away in May” and  most recently the “summer doldrums”.   Let’s face it traders can’t vacation;).   The market is inherently unpredictable, but after a credit crisis, maybe we all should have envisioned the craziness of what is now a new market high for 2009 after a heart -wrenching week for the Bears and shorts.  What a week it was!!.  A week, where we thought a summer top was indeed achieved a few Fridays ago to switching our tune quickly and pointing to 3 positives at a gap down support levels of 982, a level shorts would be hard pressed to press after a 20pts gap down.   Simply, these 3 positives carried throughout the week with Financials leading our proposed squeeze from early Wednesday morning (Chart below on site).  A move that carried  for ~40SPX by Friday‘s close making it a bullish weekly reversal. 

Anxiety may really be the buzz word now!.  The so-called correction, yes it was the shortest on record, must make those waiting for a meaningful pullback second guess themselves.  What's new since March really!.   The shorts at this point probably just wonder where to possibly start laying down positions.  The also must wonder if they have any support from their amigos when and if they do or have they turned bullish as well.   Our question is will the ‘almanac’ idea of a weak September and October most are calling for will fall by the wayside like the 2 noted at the top??.

Instead of dwelling on the SPX broad market possibilities tonight,  we think we may be coming to point where the best of the breed will begin to get the money flow.   If most finally believe we are now in a recovery,  why not start putting your money into already worthy EPS stocks as we head into Q4 as these companies are already on track after most recent Q’s.    What we probably liked more than a breakout market was some DJIM earning plays from this Q making new recent highs the past few days.  Stocks like RKT ROVI ATHR MAIL  and sector favourites like WLT.   Others like eg. WMS CTSH THS FIRE EMS SWM  are seemingly not far behind.   Even a couple biotech plays should be on top of your trading list (BCRX HGSI ).

To start the week,  we’ll let others try to figure out the broad market, our concentration will be on the list above as a starting point.

SPX daily

Just a basic SPX daily with 'R' red noted today as ~1044 and 'S' green lines at 1018 and 1013.

Intact

To kick off the week, we said we’d let the SPX work itself out at 2009 highs while we focus on individual equities.   So far, we haven’t missed much as the SPX has closed relatively flat for 2 days off best levels of day, while 2 biotech stocks we said should be on top of your trading list heading into the week have been 20%+ gainers.   The Bears will probably say the market couldn’t break Mondays highs with 3 positive headlines ( CCI/ Home prices/ Bernanke ), but as far as we’re concerned, these items were pretty well cooked into this recent rally.  The only thing that weighted on the market was a sell off in energy/ crude that took the SPX tape down with it.   This could happen on any day and is hardly an indication of where the market is going.   The rally is in intact and any weakening we're seeing this week is more a sign of the end of summer times.  The Bears are getting all riled up at the wrong time.  This market should go nowhere till post Labor day if this lightly attended market is any indication.   We’d use any surprising sell off in individual liked equities as a chance to add that position either for a quick trade or a longer hold.   

As far as those equities on our list, besides the biotech HGSI, BCRX  moves this week,  most of the stocks we’re following closely are holding up well and everyday there is one or two making new highs.eg. STEC CTSH SXCI EMS  today from our list.   Tomorrow, it might be a few others as been the case.   Off hand, we’d say there is a core of about 15 stocks that we’ve bolded  most recently in Journal that are performing just right and that's where our focus is.

We don’t expect conviction to show up on buy or sell side.  If we do a up move like today again, we would not put too much into it as profit taking will show up again and we’d use exaggerated weakness to pick up those most affected from our core. 

Floating..

The majority view after day 3 of a literally floating market is that the tape is tired with all good eco' data failing to push the market through 1030.   If this is truly the case now,  it should make for a very easy trade to downside with the Bears/ shorts pressing new positions.   Unfortunately, they have little confidence left in themselves or their fellow Bear clan members to join in on such an orchestrated move.  Therefore, we’re left with very shallow and brief dips.  The majority view is all talk and no action at this point. 

In our view, the reason the market hasn’t pushed higher this week is simple as a Supply/ Demand issue.  At these lofty levels you will always have profit takers, every blip higher brings out more of these healthy sellers.  Fortunately, the demand is there to bite on the supply,  unfortunately,  it’s not enough to breakout further.   Either the demand is truly on the beach or it’s just waiting for a new catalyst to kick some Bear butt to test 1044 Oct week highs.

DJIM #35 2009

No Eco’ data, no corporate reports could make the market do anything last week.  By close, SPX was up or down , less than 1% Monday thru Friday. 

We said earlier in the week…“We don’t expect conviction to show up on buy or sell side.  If we do a up move like today again, we would not put too much into it as profit taking will show up again and we’d use exaggerated weakness to pick up those most affected from our core.”. 

This idea lasted all week, the profit taking continued once again on Friday as positive Tech earnings were sold off early in the morning and Thursday weakness to 1015 was bought up.    Unfortunately,  we don’t expect things to get much more exciting this week as this theme should prevail once again.   As disappointing as Friday was because of the failure to even hold 1030 (new cycle 1039 hit), we doubt it is disappointing enough to break 1015 due to vacation season week in full bloom. (FTSE/UK closed Monday).  Still, we have important eco data points this week to possibly sway the market. (ISM #‘s this Tuesday + Thursday, in addition to Friday’s labour report being on deck.

*We'd watch the financials closely, if they can no longer maintain strength this market will correct.  

What can we takeaway from last week?.   We prefer to look at a positive for the whole recovery process emerging in 2H’09 as July end Tech reports have been solid and even a June Q end (INTC) raised revenue guidance.   This is something the market will get eventually and start looking ahead more as analysts will begin to revise forecasts upward and some companies will likely follow up INTC with surprise pre-announcements.

..Blame it on the Financials...

Today had all the markings of the past week and more of trading, except one thing!.   This weekend, … ”*We'd watch the financials closely, if they can no longer maintain strength this market will correct“.  This was the downside risk today, days end the SP financials were down ~5% causing a slice through important support 200 month MA.   Once this was more than a slip below all the levels we’ve discussed here 1018, 1016, 1013 recently,  it was an inevitable touchdown to SPX1.  There was no concrete catalyst for the financial swoon unless rumors of renewed credit concerns come to fruition.  In all reality, this group was up about 13% in August holding up the market, today was their time for profit taking.  This was especially true in 4 of the most speculative financial- linked stocks..AIG C FRE FNM. Basically, they started the mess and other financials followed suit.   So, this was the only difference in the markets temperament today, other than that, it once again chewed and spit out positive ECO' data from China and US.   We’ll see ISM hit 60 soon, today just being over 50 was not enough, maybe the market wanted a beat of consensus to mid 50’s.   Last week we were saying don’t put too much into up moves as profit taking will come in.   It did and than it got intertwined with the Financials that caused things to spiral out of control.   By close, this was one day where an underlying bid did not appear.  You can hardly blame such after all the technical damage done quickly.  

If you’re of the mindset of what could go wrong,  you’d be still stuck in March 2009.  If you had this renewed fear just hit you today, well, just stay out of the market.  On the other hand, we feel this is a textbook recovery and the path of less resistance is to the upside in the next 4 months.  All these positive ECo' data points that are being sold now will materialize into a much higher SPX level.  Let’s just call this sell good news and /or priced in news, a 'phase' the market is in late summer.  

Technically,  we’ll get support 975 Aug ES lows  to-980, this mark a 5 to 6% correction off the high in our books.   As you probably remember this has been the norm for corrections going back to March.  No reason to be bullish now unless we close over 1015.   Until, do what others are doing and that is take profits on any new positions you may start or old positions on any melt ups/ bounces.

..a race to 1050..SPX vs. GOLD

Our concluding takeways from Wednesday action played themselves out today.   Once again, the shorts disappointed by not pressing new positions to bring the Bulls to their knees.  Well, really it’s not a disappointment if you’re a Bull,  but it could be a lost opportunity for the Bears in the very short term.   We also discussed the failure of the Bulls to get an underlying bid going for a few days.   By end of day they asserted themselves somewhat.   Still, we think it was hardly conviction buying, but more of a technical driven bounce starting we said may occur before the weekend.   Considering ECO data has been a non event,  tomorrow's NFP will probably be more of the same and this should allow the market to bounce higher.  If we bounce off 1000SPX overnight a few times, it should signal we go higher tomorrow.   We said we won't get bullish unless we get over 1015, we can add now over low 1020's and we think it is inevitable we go higher than recent high cycle.    Still, let's not lose the conservative side of things and bearishly think we'll correct in September until we see those levels noted.

In the meantime, as said, we'd concentrate on sector moves  at this point, which means EPS plays are only going to work again if the market outperforms everyone`s expectations in September.  …"we'd be very aggressive in chasing any on a short term basis (China linked stocks is one we're watching closer today, followed by commods').   Gold's  move today, on the other hand is not something we'd want to get into just yet".     While the market meandered and flatlined on the major indicies,  the China stocks outperformed thanks to commentary out of officials overseas and commod`s (notably coal) are maybe going to be focused on some more as the 'ìnflation' buzzword has re-entered the market after the 2 ISM's this week.   One look at the final prices of the Gold-Silver  list we put up before open and it's quite evident this is where the current money flow is going.    In less than 48 hours, this is being made out to be the next bubble in the market.   We've despised Gold stocks in the past,  but if the herd wants to gather and storm and truly create a Gold rush, we have no choice left but to play some as well.  

If this is truly a one time/ breakout event over 1000,  we have to give some of the Gold stocks a feel,  but we don't want to get out of hand just yet as this could just be another fake signal.  If there is another group acting well like today in China... commods',  you really don't need to get into the riskier Golds.   Simply, we may have a race to 1050 with SPX vs. Gold and some money on 'both' sides is probably the best bet. 

Have a great long weekend..

....Humble Bull...

Even though we got what we wanted in the past 3 trading sessions..”We said we won't get bullish unless we get over 1015, we can add now over low 1020's and we think it is inevitable we go higher than recent high cycle“,  we have to remind ourselves this market can humble you quickly!.  Therefore, we choose to lighten up positions as all the strength in the market was in the 3 groups we were on top of…Commods, China, Gold.   We don’t need to be overly bullish now,  it doesn’t matter really considering we’ve been on right side anticipating a bounce since late last week with the right stocks.  So, right now, we’re taking a breather as the market should by lightening up.  If we can just eke out a slight green day tomorrow, it would be a positive.  

Interestingly, we gapped all the supports we’ve been noting by opening at 1018!. Clearly, this gap at supports (1016-1018 ) is even more important now and we’d be using it as support going forward.   We’re hardly TA experts, but this seems to be quite the bullish gap for a retest of 1039 at least.

As far as individual plays/ sectors, we’d still concentrate on the 3 sec's above and EPS plays.  We had a few making new highs,  ININ and ATHR  premkt was up to $29.  If you were frustrated by ATHR's lacklustre performance after we alerted the gap after earnings, you missed a 25% gain now this Q in it.  Clearly, if we go with an EPS play here the best past is you likely won’t be losing money, you just need patience sometimes for the results to come in and a good entry.   Others lining up might be, ROVI, CTSH, STEC  bounced nicely today again and should have follow through.  HITK  moved into earnings.  Many of the newer EPS stocks we liked this Q,  will move into their next dates and not just a few days before.  It’s not pre- earnings runs, it is simply the course of things these days as earnings winners don’t all go like MAIL , but take another route which means they get valued into next report.

Today, we had FSLR  for a possible max of 10 points as a day trade.  We knew a senior Chinese delegation was visiting the company over the weekend /late last week in the US and thought a deal of some kind would be in the works and so played it.  You don’t go all that way just to do nothing.   In the afternoon, a deal was announced for a major solar plant in China.  CTRP  was upgraded today by GS, but UTA  was the big winner as it’s run now 20%+ since alerted as a secondary play around $9.30.  We like this segment of China, also they are possibly opening up their skies to more business and becoming more friendly as far as flight plans/taxes.

After INTC guide recently,  we pointed out that their raising of guidance will lead to many more upside surprises going forward in tech.   We are getting glimpses of this daily with stocks such as MCHP  last night.  Reason, we are pointing this out now is that are fewer and fewer negative preannouncements in all sectors than in other years going forward and more upside.  This should lead to an interesting EPS season, yep, it’s close with RIMM  reporting Sept 24!.

1044

A week ago in the midst of what was the much ballyhooed ‘correction’, we made what you have to admit was a ballsy call of an inevitable new cycle high outlining the steps to watch for in order for such to happen.  First, the inability and missed opp’ by shorts to bring the bulls to their knees, a technical bounce beginning possibly after Bulls catch their wind,  becoming bullish over 1015/16, inevitable new cycle high if we get over 1020-23 and a what had to be a bullish gap at 1016-1018 previous support.   Of course, this ladder program could have broken down if we had some negative catalyst, but the thing for a trader is to be prepared.   As a Bull, you better be prepared for the upside and not thinking ‘what if’ this and/ or that happens.  We hate the obsession with SPX, but there's a lot of you here that trade the SPX ES, SPY and so it`s become a natural trend here the past year.   For us, we just like to see earnings and stocks with deserving higher prices become more in focus as it should in a recovery process and hope to continue to toss out trades like SWM  yesterday, steel commodity focus (X ), FSLR, CTRP-UTA,  GOLD  that have worked quickly coinciding with this SPX move.  All this while maintaining our earnings- sectors plays which includes most of those names for the longer term trader.

Today, now up over 40pts since last week,  we closed or you could say painted the close at the 1044 Oct week high.  To be honest..so what!.  “So what?” is seemingly also the  attitude of the market as there is no real aggressive  buying volume leading to this new rally cycle high, ‘potential’ breakout.   This will be the cry of the shorts…‘no volume' today or the past 4 days of this rally‘.  Geez..this should be a top 10 hit song for the past few months!.   Let’s give up waiting for it and just move on.   Today's volume was the recent trend of around 9 bln traded, at least the volume is not all AIG BAC FNM etc as it was recently.  Also, a lot of the big money is sitting in on conferences all over the country.  We have the Cit tech, BAC media and many Retail open houses at GS- Barclays.   Do you know what this money is hearing?.   Nothing, but good stuff as you can see by the numerous analyst upgrades and companies raising numbers at the tech conferences (JNPR today as example).   As long as we stay grind higher or just consolidate over SPX1, we’ll have earnings starting soon and last months Bear cry of no Revenue growth will not be an excuse this time around, but will likely be the fuel for the market.  

So, what now…hopefully, we hope we avoid a gap up or down in the morning from any surprise China data (noted yesterday) and just consolidate/ grind this recent move.

Here's some Honey...

Are there really Bears who don‘t like honey?.   Well,  it seems the ones in the stocks market these days just don’t, even when it’s handed to them on a plate overnight at SPX ES 1030.   Yes.. that's about 20 points from lows to highs the Bears got teased and than dragged by an underlying bid of swarming Bees!.   What had the makings of a 1+% down day due to world markets feeling the US-China trade wars,  turned out to be just a regular ordinary day in this Bull rally.....Bears not pressuring new positions….Bulls coming in with an underlying bid..new cycle high being made.    The Bears just can`t conquer their fear of upside risks and really who could blame them after the 2 recent slides that ended up disappearing by short covering with new highs being made both times.   Today`s upside risk is not really the Retail report, this report tomorrow has been a time shorts position themselves prior to this summer, which led to sell offs on day of.  

In our view, today`s upside risk is something you probably didn't hear much about in the media.  It is the Barclay`s conference tomorrow/ Wednesday, where banks will start updating the markets on Q3!.  We discussed the positive tone coming out of the conferences last week, notably the Tech`s sending a positive tone that helped the market make new highs.  Well, this week, this financial conference is fear for Bears!.  We all remember what the Bank- Broker tone did for the market to start this rally!.  Simply, the shorts were reluctant and covered in case things are upbeat leading to SP financials ending up 1.4% on the day.    Early in the summer, we said eventually after this initial rally, we anticipate the Banks- Brokers to lead the market higher in Q3-4.    Is this the beginning of this or are they going to be the reason we pullback and correct.    Simply,  this conference is important to the Bull cause and we'll monitor closely…(sell off on good tone or will market run higher?). Still, there is other data points to watch for, inc retail sales and earning from some notable names this week.

As far as individual earnings linked stocks, we had a few more hovering around and/ or making new highs like SWI,  which has had consecutive up days.   FIRE  alerted again last week is capable of duplicating such a move.   UTA  continues to find a bid, but after being alerted in $9.30`s recently, a run to 12.60 is not a bad excuse to take some profits as it just clears 50ma (even though today it had its best bid day).   A stock like this is one we'd be buying prior to its next earnings report due to its China and business factor.    VVUS,  showed it's capable of moving fast on any given day, we have no hesitation holding it long term as we originally said.

Shadowlist

 Updated list of stocks we're trading and/or watching for market/ sector sentiment. (Below, visit site)

..doin' the Hokey Pokey..

So…who’s responsible for the market moving almost 40pts since an overnight low of 1030 a few days back?.  DJIM members know…right?.   We definitely hope or you’re missing the point of our daily Journals.
Simply, the answer is the finnacials..banks- brokers etc positive/upbeat tone from Barclays conference.

Why?…."In our view, today`s upside risk is something you probably didn't hear much about in the media.  It is the Barclay`s conference tomorrow/ Wednesday, where banks will start updating the markets on Q3!.  …..Well, this week, this financial conference is fear for Bears! …………The shorts have been covering ever since and we say "hello" to 1068-1070.  The market not only closed above 1055 Aug upper trendline, it just went straight for a close of 1068 on a broad move.     Again,  shorts either cover or have no cojones to put on new positions due to "upside risk".  The best they can do is wear a protective cup. 

What we are seeing is our premise of banks- brokers taking leadership again for the next/ final leg higher in 2009.   It's seemingly beginning, but we have apprehension because it's happening too early.   What the hell are we going to do the rest of the year, if this continues now and we shoot to 1150-1200?.   To be honest, we need to curb the enthusiasm!

You put your right foot in,
You put your right foot out,
You put your right foot in
And you shake it all about.
You do the Hokey Pokey
And you turn yourself around
That's what it's all about!

Yep,  that's what the market is doing again this week as SP Financials (nearly 5% up) put their right foot in and the Techs put their right foot out! (+1.5% for the week) and the market shakes to new cycle highs one again.  Note, we had also lukewarm reaction to a few positive pre- announcements eg. SLAB.  No effect worries us some going into EPS season as it comes on the heels of muted INTC  reaction a few weeks back.

Commodity- linked stocks, adding to USD weakness, we had many positives from talk of China demand from atleast 3 different sources.  As far as VVUS  and it's offering AMC...you don't do a positive phase 3 trial without a follow up secondary.    It's the law of the land and in this case it's good its announced quickly.  Hopefully it can be priced immediately and than we can get on with the stock moving with some fat cats in.  It's occurred with OGXI which doubled since theirs, HGSI  which went up at least 50% higher after its secondary.  No promises on same % results, but as a long term hold it will pay.

DJIM #38 2009

Despite the last week’s final box score of SPX up 2.5% on the week, we are going into a FED/ IPO/ RIMM week with a continued  ‘cautious’ stance noted late last week.   This is not a fear factor,  it’s just prudent money management of narrowing down number and sizes of positions awaiting a new catalyst.

As discussed,  it is becoming difficult to chase strength as the risk /reward is just not there entering a position of size on many of the stocks we’ve been playing the last 2 Q’s at DJIM at this stage.  We want better entry points now on many of our favourites.   In the meantime,  we hope to find a quick new one’s like CTB  last week to trade for a few points.

So, the best thing to do is get ‘selective’ until earnings sets the tone either way.   It is unreasonable to think the market will get out of hand to the upside prior to earning reports unless some very positive unexpected catalyst comes up before.  

Last week, we our lead was the upcoming Barclays financial Conference to watch for as an upside risk. This week… In the last journal, we noted the number of IPO’s coming up  that will give us signs on the health of the market, thus, the SP tape direction.  

Everything else remains the same, the Bull/ Bear tone , the technical picture. 

..'watch your (FOMC) language"

This is the message, the idea..lead (below)...one way the market may look at the statement, if everything else in it remains in check.

Another day, another new bull cycle high close.  Ho-Humm, eh!.   The story remains the same as the weak dollar is pushing the carry trades and flows to risk = equities.  ES (SPX) keep making higher lows and higher highs, only thing lacking in the futures is volume which was off by ~25% from the recent avg’s.  Everyone seems to believe we’re busting out higher, this includes Bears of all colors and all that is in the way is the FOMC language tomorrow afternoon.
 
We’ve discussed early summer our premise of Banks- Brokers leading the next leg.  We’ve been apprehensive on this occurring 'now' due to the fact... what are we going to the rest of the year if we shoot 1100-1200 very soon?    Today, we alerted to something we can’t ignore and that is a basket of big financials hitting new highs simultaneously.   Not many pay attention or know CS is just as big as a player as GS, JPM in running the tape.   Today, they (CS) and GS JPM MS  all held hands to highs and it makes us wonder if the next push is inevitable and in short order. 

FWIW, we have this headline of sorts into tomorrow…“Bank Breakout Signals the Next Move Up”;   Cramer thinks the big rally in the banks (esp. the large money centers) signals further support for the market.

Let’s just say,  if the FOMC excludes/ removes a sentence… “economic activity is likely to remain weak for a time”,  the market may melt up and our beloved financials will likely lead the way.  This is the way we’re positioned at close with focus on financial related stocks from banks-brokers to Asset mangers to credit cards.   If this statement remains, we probably won't be dealing with 1100 SPX too soon. It may even give reason to sell-off.  (This was the start of paragraph 2 in last FOMC statement, so give the statement a quick look when released.)