A technical matter..

The Bears will cite today’s action as another failure at around 200ma levels.  In our view, we have to consider as to how fast we got here since Thursday’s ECB conference.

For one thing not many expected a follow through day on Friday as to 2 consecutive days of gains had become a rare occurrence.   Today’s early gap/ action strength and a high of 1106 was even a bigger surprise most likely.   A little too fast and therefore definitely an oppy’ to take some profits knowing full well 200ma breakout would not be so easy and more importantly....so quickly accomplished!.   We should just be happy we closed above the 20ma for a second day and the fact we are basing in the 1040-1110 day now for 4 weeks (21 trading days),  which will make any breakout to the upside that more important and credible.   So, basically we`re in technical purgatory!.   The way the things are shaping up, this range is coming right in to the hands of earnings announcements to decide its summer fate.

...looking ahead

Following an eventful 4 days for the Bulls, today’s flat session is perfectly fine with us.   Actually, even better than fine if you consider the 200ma provided support.   Even though, we didn't see a lot of new buying/ conviction to push this market even higher (let’s be realistic short term..digestion needed),  it is almost as good because we saw ‘dip buyers’  come in.    An oppy’ to buy the market on dips has been methodology of longs for a long time to get into this market.  We just haven’t seen those explosive breakouts of years past, instead those wanting to be in the market..buy the dips.   This is what we will center around going forward and will use it ourselves to position into Q end.  

Speaking of Q end, entering the week, we discussed “…sidelined money should come in for June Q end”.  This Q provides more than one reason for this to occur.    First, look at where the SPX is today on June 16th…almost half way through the year…1115.!   Yes, that’s a hefty return of 0% on the widely followed benchmark for every manager with a book in 2010.   Secondly, consider this…Hedge funds – “Hedge funds hit in monstrous May….Global hedge funds in May suffered the heaviest losses for 18 months after some of biggest and most successful managers were wrong-footed by world markets”.      Simply,  if we’re these guys we’re in a mess after May and need to put up some numbers, not only for June to make-up losses and avoid consecutive months of underperformance, but they also have to put up Q numbers!.    To us at DJIM, this is almost a perfect storm for money flow to come in the next 2 weeks.    This is why we will be watching the dips carefully for oppy’ for accumulation.

As far a individual stocks, sectors, we are seeing many of our listed stocks hitting NCH’s the past few days…EDU AZO VCI SXCI RBCN  and these aren’t even offensive high beta stocks.   At this point,  we are concentrating on the tech’s and have many from our lists of techs/and earnings related that on any given day can pop..from VMW  to NFLX AKAM, NTAP (SNDK added)  etc.   Many like DLB VRSN  are also setting up near highs.    Hopefully in the days heading into Q end, the number of sectors in play extends to beat up commodity linked stocks and more high beta names/sec‘s.   Until this is evident, we’ll concentrate on Nazzy/ tech linked stocks.

DJIM #25 2010

Early last week, we noted ..’it’s technical matter'…” We should just be happy we closed above the 20ma for a second day and the fact we are basing in the 1040-1110 day now for 4 weeks (21 trading days),  which will make any breakout to the upside that more important and credible".   After the breakout from this range, we got  a bunch of lacklustre days that many were knocking.  To ‘us’..the flat action and dips that started Wednesday was…“perfectly fine with us.   Actually, even better than fine if you consider the 200ma provided support.   Even though, we didn't see a lot of new buying/ conviction to push this market even higher (let’sbe realistic short term..digestion needed),  it is almost as good because we saw dip buyers  come in".   The action following up to Friday close was perfect digestion, consolidation  action despite clusters of  'softer`eco data and corporate data that couldn`t derail the recent push because Euro land calmness, manageability was more important for the market. 

So, the ducks were lining up and tonight we got an unexpected Yuan decision from China and ES is up nicely.   This is going to become part of the global rebound we are in the midst of, since May's derisking.  This is definitely a US TSY- China co-ordinated move as relations had recently been heating up.  This relieves "overhang" tension.    To us, this duck lining up is the effect on commodities and commodities linked stocks it will have over the longer term as the significance is the probability of more China purchasing power.   Now, we can look at trading commodity stocks as early as tomorrow.  

As far as the rest of the week,  last weeks 'softer' data will be followed by much more important data from both eco/corporate fronts this week.   As with every catalyst, the market has short term memory and if we get soft data this week, the market will re-focus on this noise.

...speculation

If what seemed like market digestion over the past week, we’d have to call today a ‘puke’ of that digestion.   What’s disheartening is….“We just haven’t seen those explosive breakouts of years past, instead those wanting to be in the market..buy the dips. “ …Yes, we don’t get those breakouts to the upside and than we get these extreme sell offs that are seemingly so easy.   This one breaking up consolidation, breaking 200ma and than the 1106 and even what’s so supposedly is a psyche’ level of 1100.   Add the fact,  dip buyers were no where in sight made this even more hard to watch.   At least, it’s mostly an ETF selling program as individual stocks held up quite well.

What tipped the market?   There was no one catalyst, but a very strong 2yr auction maybe be cited as it shows de-risking signs and more ‘softer‘ than expected data was revealed.   But, the overwhelming reason in conjunction with the ‘softer’ is probably the FOMC and speculation of change  of language (“mild downgrade“) on the growth of the economy.   You can connect the dots by seeing the TRAN  down >3.5% today.  This is probably not a coincidence as the transports are a major gauge for the economy.    If this is true, it only re-inforces no hikes for a long time.  This is fine, but what the market maybe showing is it’s getting impatient here and saying the economy needs to do it on it’s own w/o their help! (low and long for rates).

If this speculation doesn’t come to fruition the market has reason to snap back hard.  If a mild downgrade does come, it may be priced in after 2 days of hard selling and we could snap back just as easily.  All in all,  this shouldn’t be a surprise as we’ve had a slew of reasons in the past month to think this was a probablility!.

AMC, we finally got a piece of 'stronger' than expected data after days of 'softer' corporate data from JBL, which bodes well likely for the RIMM/ CSCO's types.

Where are you..Dipper?

In a complete contrast to last week, 'dipper' buyers are simply away this week.   It’s not that selling pressure is extreme to suggest a fall of 60SPX points from highs attained from the beginning of the week is the reason.   It’s just a buyers strike that is grinding the market away.  Any other time when we’d see a >5% skid in a span of a few trading days,  we’d expect individual stocks to get clobbered 2x that figure.    We don’t see this happening.   This is clearly another sign this is mostly an ETF sensation where the majority of trading is taking place.    Fast traders are controlling the game while there is no buying by MF’S/HF.   It is not an exodus out of stocks, but it doesn’t mean it won’t become this if we don’t get a reprieve very soon.

How soon is soon?.  Well, let’s just say we’d use ~1072 as the benchmark, so soon.. is very soon as we hover around those levels AMC/ tonight.  A close below and it would seem Bulls have lost total control and recent lows would be attainable once again..if not lower.  Considering, we are heading into a vacation/ holiday weeks and a few days of Q end to trade,  this may not be achievable for the Bears just yet.

..and yes, we did feel the earthquake in Toronto.. Let’s just say the wheezy feeling was reminiscent of the recent “Flash Crash”.  

.."yellow card'" for the market

It’s become overly apparent the last 2-3 trading days, the only potential catalyst for the Bulls is potentially earnings season.  Only problem is it really does not kick off till July 12th with AA, so far we’ve been noting there is no’ barometer’ type corporate report recently or upcoming to change this premise till 2 weeks from now.  The idea stocks are cheap and pessimism abound may prove to be a catalyst in the making here.    Until, what we’re left with is no reason for buyers to step up just yet, thus leaving room to meander and potentially break our recent set 1072 benchmark.   The overall range low of 1040-1050 is still very much in play.

Today,  volume was non-existent and a tight SPX range has drawn up a ‘technical’ triangle over the past few sessions.  Even though light volume, a pre July 4th holiday week, end of Q are the perfect ingredients for an upside break to the upside most years,  the individual stock action so far is indicating the opposite (downside break).   In all honesty,  downside may be the only alternative to get some buying and a trade into NFP# at least.  Downside break here would not be that hurtful,  if it continues to be a fast traders market where ETF’s are the only thing being traded.    Afterwards,  this may allow a short lived trade before or after the NFP if surprisingly positive.   Hey… it’s better than any set-up we`ve seen for a trade in a long while.  Not a single sector is worth a look/ trade recently, commodities are terrible showing some are not ready for a possible China PMI  Wednesday to come down.   This would be natural at this stage, but the market may think numbers go up forever and if not, it's all over.    A smelly  problem is one we noted before last Wednesday trade  is the TSY action.   Today,  we set record low's in the 2 year and this de-risking is indicating something is fishy out there.  

If this is only due to pessimism in regards to earnings coming, this can bring a quick reversal into risky assets (equities) than.   If it's indicating something else, such as something Geo-political..more European mess..etc,  we won't know till it's too late, so be cautious. 

.. 'red card' day

Heading into the day with World Cup fever we gave the market a “yellow card”,  citing it for bad behaviour with a ‘so be cautious’  final words.    Well,  let’s just say, it didn’t change it’s ways and only exuberated it’s ‘pessimistic’ tendencies garnering a ’red card’ and a cleat to the groin.    In essence this ‘red card’ was rudely given to investors who were forced to leave the market game with heads hanging down in defeat.  The investor has been given many reasons to leave the game in the past few years and go find a new game to play due to no trust in the system.  Most recently scared from ‘Flash crash’ to today’s revised US Conf. Board revision to China’s economic index  (The Conference Board Leading Economic Index (LEI) for China increased 0.3 percent in April to 145.0. The LEI for China was previously reported to have increased 1.7 percent in April but has been revised to correct a calculation error) ,  the investor is befuddled as to the fair play rules of this investing game!.   A ‘smelly’  problem bolded last Journal was the highlight today for media as all discussion centered around the TSY’s !.   We’re not overly concerned about the CCI # , just because ramifications of all activity from Europe to BP to a bad stock market in May had to have ramifications sooner than later. 

Only last week, we discussed the ‘disheartening’ nature of being a ‘long investor and how ‘these extreme sell offs that are seemingly so easy”.   Today, unfortunately it all played out as the ETF trade of over a week turned into selling of individual equities with reckless abandonment.   The exodus finally happened.    Nothing was left out, no sectors at all . ….Unbelievable carnage today as every play was seemingly off 4-5% minimum and many at /or near a double digit gain loss by lunch hour…industrials, Financials, tech 4% (SOX just under 5%), Discretionaries, Materials 3.5%, Steels issue as much as 10% some, and even defensive Health care was off nearly 2%.   Investors seemingly work for days/ weeks to get a nice run in a stock of 2-3-4-5% and than in one swoop it’s all taken away and more as today proved, especially in high beta/ winners…into 24th “The only thing you’d have to watch is your position size, notably in what you know are high bet/high volatility stocks”.  This fact never changes in the game as money flow in the best,  leaves the fastest.

What’s occurred here in June is a head fake has been manipulated.  Essentially, what has happened is the recent move to 1130 on ‘softer data’ was orchestrated to get out of the market and than use this usual Q end week to markdown.   This recent action exemplifies the market should not have gone up on ‘softer data’.   Why should it have, it is the opposite of what it should have been doing, yet it grinded higher.  …“For some reason, this market has been able to shrug off a number of disappointing Eco. data lately.    Although this may seem positive,  we don't believe this is the kind of trend people like to see as this week is proving to be a set back (not holding 200ma).  Our most important gauge is the 20MA and the market is toying with it today.”.    So, that’s the No-trade clause for anyone thinking of being that investor who is thinking of holding onto stocks for a while.  Need to get above this bear gap formed now to think long for long.

As far as that 20ma, since we noted this last week, the market has closed below it every day and as of close today, we’re something 45 pts below it.  Simply..the rule here is if you’re being toyed with, it’s best to exit before you become a toy puppet yourself.    Now, as the 1072 has fallen and the 1040-50 IS in play again.   In discussing 1040-1050 in play yesterday, we also said the only alternative for the Bulls to get some buying is a ‘ downside’ break.   Well, we got it and unfortunately it was hurtful as it wasn’t just ETF based.  It did take valuations down quickly on individual stocks, which is not so bad going into earnings.

Now..as far as a tradeable play, 3 hopes  for such...

• China PMI Wednesday is 'fudged' and makes this revision today questionable
• ECB liquidity tender expiry coming up, which is a monetary tightening fear comes out not as badly as feared.  If demand smaller tomorrow than feared in 3mth, it should be somewhat of a relief.
• NFP# comes in the top range est., ADP may give some light tomorrow.

Into the trading day...

Heading into the day with World Cup fever we gave the market a “yellow card”,  citing it for bad behaviour with a ‘so be cautious’  final words.    Well,  let’s just say, it didn’t change it’s ways and only exuberated it’s ‘pessimistic’ tendencies garnering a ’red card’ and a cleat to the groin.    In essence this ‘red card’ was rudely given to investors who were forced to leave the market game with heads hanging down in defeat.  The investor has been given many reasons to leave the game in the past few years and go find a new game to play due to no trust in the system.  Most recently scared from ‘Flash crash’ to today’s revised US Conf. Board revision to China’s economic index  (The Conference Board Leading Economic Index (LEI) for China increased 0.3 percent in April to 145.0. The LEI for China was previously reported to have increased 1.7 percent in April but has been revised to correct a calculation error) ,  the investor is befuddled as to the fair play rules of this investing game!.   A ‘smelly’  problem bolded last Journal was the highlight today for media as all discussion centered around the TSY’s !.   We’re not overly concerned about the CCI # , just because ramifications of all activity from Europe to BP to a bad stock market in May had to have ramifications sooner than later. 

Only last week, we discussed the ‘disheartening’ nature of being a ‘long investor and how ‘these extreme sell offs that are seemingly so easy”.   Today, unfortunately it all played out as the ETF trade of over a week turned into selling of individual equities with reckless abandonment.   The exodus finally happened.    Nothing was left out, no sectors at all . ….Unbelievable carnage today as every play was seemingly off 4-5% minimum and many at /or near a double digit gain loss by lunch hour…industrials, Financials, tech 4% (SOX just under 5%), Discretionaries, Materials 3.5%, Steels issue as much as 10% some, and even defensive Health care was off nearly 2%.   Investors seemingly work for days/ weeks to get a nice run in a stock of 2-3-4-5% and than in one swoop it’s all taken away and more as today proved, especially in high beta/ winners…into 24th “The only thing you’d have to watch is your position size, notably in what you know are high bet/high volatility stocks”.  This fact never changes in the game as money flow in the best,  leaves the fastest.

What’s occurred here in June is a head fake has been manipulated.  Essentially, what has happened is the recent move to 1130 on ‘softer data’ was orchestrated to get out of the market and than use this usual Q end week to markdown.   This recent action exemplifies the market should not have gone up on ‘softer data’.   Why should it have, it is the opposite of what it should have been doing, yet it grinded higher.  …“For some reason, this market has been able to shrug off a number of disappointing Eco. data lately.    Although this may seem positive,  we don't believe this is the kind of trend people like to see as this week is proving to be a set back (not holding 200ma).  Our most important gauge is the 20MA and the market is toying with it today.”.    So, that’s the No-trade clause for anyone thinking of being that investor who is thinking of holding onto stocks for a while.  Need to get above this bear gap formed now to think long for long.

As far as that 20ma, since we noted this last week, the market has closed below it every day and as of close today, we’re something 45 pts below it.  Simply..the rule here is if you’re being toyed with, it’s best to exit before you become a toy puppet yourself.    Now, as the 1072 has fallen and the 1040-50 IS in play again.   In discussing 1040-1050 in play yesterday, we also said the only alternative for the Bulls to get some buying is a ‘ downside’ break.   Well, we got it and unfortunately it was hurtful as it wasn’t just ETF based.  It did take valuations down quickly on individual stocks, which is not so bad going into earnings.

Now..as far as a tradeable play, 3 hopes  for such...

• China PMI Wednesday is 'fudged' and makes this revision today questionable
• ECB liquidity tender expiry coming up, which is a monetary tightening fear comes out not as badly as feared.  If demand smaller tomorrow than feared in 3mth, it should be somewhat of a relief.
• NFP# comes in the top range est., ADP may give some light tomorrow.

Clouds rolled in….

Today’s eco’ developments leading to crazy market developments/ action was enough to leave any investor/trader with dizzy spells into the night.   You actually don’t know where to start in dissecting the ramifications of it all.    Do you pretend to be an economist in trying to figure out the rolling clouds of ugly data (add housing, ISM) and get on the double dip/recession longer out bandwagon (we won't, no matter the fear mongering out there) or do you pretend to a be a technical guru and try to predict if we hit short term support at 1008 (March 09- April ‘10 38.2 retrace) and continue today’s bounce and/or did we have a decisive H&S neckline break at 1040 and about to do the “death cross” 50/200ma’s... Hell  ...while we're at it,  why not try to understand the incredible move on the Euro and the flight from USD as a safe haven.  Isn’t a lower USD, higher Euro usually good for the stock market?… or is it just a greater sign of global alarm bells going off or just a consequence of ECB tightening this week?  Interpretations of all this are going to be off the wall!.  Before today, we were thinking the performance of the 10yrTSY ($TNX) vs. the S&P in the previous Q would lead to an eventual 'rotation'.  You can only bleed so much out of one or the other before the herd reverses the trade as it has in USD/EURO in big ways.  So, the $TNX is another indicator we're watching.

Believe it or not, we actually saw some interesting positives that may lead to the early July bounce we just talked about yesterday...but, you know what?…let’s get through the June NFP# tomorrow first, last bearish consensus we know is a forecast of -130/140K  with a rebound in private +110k, but that may have changed some.   If by miracle from the gods through the rolled in clouds,  the #'s are viewed positively and/or worse case scenario is somehow baked, than of course, we may bounce further.     But, unless a close of 1040 is achieved in order to avoid a bearish 'weekly' stick,  we doubt sentiment will change about the markets this quickly.

+5 SPX points...best day

..Believe it or not, that's the best % gain since June 15th!.

When you see the ES down to very low 1000’s early evening, the last thing you want see is a ramp later overnight and than a move to a cluster of resistance just over 1040-45 by 10am.   This is simply a set up for disappointment as this ramp job was on ' no ground breaking’ catalyst to get the market out of it’s misery.   This up move had all the reasons in the world to be rejected in the 1040+ range.   We recently said we’re watching the TSY’s ($TNX) for possible rotation , if you were playing CNBC in the background all the talk was TSY’s early action was not indicative of money going into riskier assets (equities). 

The best way possibly to look at the market is by it’s close of 1028.  The Bulls and Bears should not be over analyzing the moves up or down and neither side should be excited or depressed over it.  Why?.  The move up had no conviction, real buyers and the sell off had no real sellers, except fast traders and those profit takers who saw this as a gift!.  It was a pure lack of buying that just naturally would exhaust itself, the bulls ran out of buyers and downturn ensued.    We’d look at the close today, a 3rd over 1020 as a potential base forming and nothing more.   A stoppage to the recent carnage, a view to the daily index chart may be the only thing the brings out real buyers soon thinking the market has settled and bottomed for now.

The ‘doom and gloom’ speak is excessive now and most measures of market sentiment prove it as we are at March ‘09 lows or at 2010 low’s in other sentiment readings.  It can’t be more oversold seemingly at this point and barring any negative surprises, the next move upwards should fare much better.

Today's pre-market alert:..some light at the end of the doom and gloom tunnel, mkt has/may have stuff to work with Euro stress test criteria to be laid out today likely, if ' tough' enough might be a positive catalyst.

Some more positives possibly out of China..won't make new initiatives on property mkt. Yesterday was 100bln of infrastructure programs by gov't announced..

Samsung prelim #'s good, but no guidance as usual