..dime action?

What all traders know from early September is this market can stop and start on a dime. 

Beginning of September this Bull run was seemingly losing steam (losing 3.5% from H to L).  In the middle of this dip, we talked about Bulls not coming in/ providing underlying bid until things settled down, especially after a 2.2% drop in one day.   Also, at this point we talked about the Bears missing an opportunity to press the Bulls to their knees.   Seemingly, we could be in the same pattern.  It’s seems too predictable now,  but the shorts have this as on upside risk always shadowing them.  The ability of the market to stop and start up again is there once again.   Right here and now is probably a great opportunity for such to occur soon.   Why?.  This dip has given an opportunity for money managers to dress up their books as we’re coming into Q end and they might be foaming at the mouth.  The start of Window dressing may just bounce this market very soon. 

Still,  this action is reminiscent of the action prior to AA  earnings last Q.   If this is the case 1035  is a possibility (because we closed below 1055 today) before AA’s earnings in 2 weeks,  but it doesn’t curtail a reversal possibility before.  Understand though, we're not talking a bounce of 70-80pts here like last time!!.  Use reversal if it comes to lighten up existing positions and/ or just get your daytrader face on for the time being.

Takeaways from todays’ action

IJC# was positive but was nullified by a negative housing number.  Strong USD pressuring commods’ and not helping bounce opp’ for risk assets such as equities.

Volume was heavy, but it was confined to the SPY and sector ETF’s, even in the continued sell off to 1045 there was minimal damage to the majority of individual stocks as many < 1-2% down on our list. Might be a positive.  Individual stocks taking a licking are more of the momo type (casinos) and/or garbage stocks with bigger profits to take off the table.

IPO’s,  we ignore the REIT IPO's, we all know this is crowded/ garbage space.  Instead, we look to one we highlighted AONE  and the spectacular day it had.  The offering and size was raised (positive) a few times and it still managed to get a herd into all day pushing it higher.  This is a positive for the market's mentality going forward.  Still, all the new issuance's and follow on issues hitting the market puts the market in a posssible digestive mood again, keeping 1100 out of reach for the time being.

RIMM,  judging by ES action tonight the market may shrug this report off and may signal a bounce begins from 1048.

..dime action delivered..

Simply,  the market was high as a kite (M&A’s, a drug deal) today and it didn’t take much attendance to make a ‘technically’  impressive ‘ dime action’ move that definitely included ‘window dressing‘. 

We understand what a grind it’s been on the SP as today’s move was the biggest since Aug 21st.   Why was this impressive ‘technically’ only ?.   Well,  it’s because we found support in between 1048 and the important 1035-38.  It’s not a exact science to bounce off exactly, maybe 1041 low was enough.  Once we closed below 10551057, we noted 1035 was a possibility, but it didn’t curtail a reversal/ dime action before.   We pretty well got that and what makes the move ‘technically’ impressive is we closed above (1057 Sept 21 low).   So, why the emphasis on’ technically’ impressive?.   That’s because it was the only reason as there was NO conviction buying!.   Once the window dressing bid leaves in the next few trading hours,  we have no reason to believe a market high on a Drug deal and an end of Q window dressing can fly too much higher, especially with the NFP report on deck.  

Today’s leader  was the SP Financial index up 3.4%, but this really didn’t include the usual suspects..GS, JPM etc.  Instead, it was the asset managers we alerted to last week..names incl, BEN BLK, JEF  and insurance names such as PRE , a DJIM earnings play broke out nicely.  

In conclusion, we take the upside move in stride until/ if 1067 resistance is broken.

..bumpy ride

We opened September just below SPX1K, today we close off the month about 60 pts higher. All the hoopla surrounding a traditional September swoon just never materialized!.  Unfortunately, we conclude the month with consecutive eco’ data points that may give the market it’s first ‘ headwinds’ in months.  Today, it was the Chi- PMI, ADP on the heels of Consumer confidence #, durable goods and some housing numbers in the past week or so.  Surprisingly …fortunately the dip buyers come in and provide an underlying bid , today is a prime example as we bounced hard into the green after a quick sell off.   At this point, the buy side is thinking earnings this upcoming Q will negate the current eco’ headwinds.

We pretty well covered our sentiment on the market through Alert-comments today, we can only conclude by saying, we can do without more headwinds in eco’ data to close off the week…ISM, NFP Friday. 

The market is held hostage now by two things, one is the SPX/ ES technical trade and the other is the eco’ data.    As we said last week, it’s time to have your day trader face on.   This means when we get a point or two move in a stock like GNK yesterday, CTRP today, we take the profits quickly and look elsewhere.   Today, we touched on China's 8 day holiday,  we'll keep a close eye on this sector to see if their celebrations spread to some of the stocks here.

DJIM #40 2009

A clear sentiment change by the close of Friday’s trade and it's timing really stems from our premarket alert on Tuesday warning…“ISM# tomorrow, today is the Chi-town # … as a possible prelude.   If this falls <50, watch out as it's unfathomable to many of us in the 'recovery' camp. Very recent headwinds in US eco' data make this noteworthy to watch today”.  

As the market fell 5% from those Tuesdays’ morning highs,  it is clear the sentiment changed, the Bears got some ammunition as the ‘recovery camp’ and it’s long run got dampened due to the accumulation of negative eco’ data over the past 1-2 weeks.     As we said late last week, eco’ data can get bumpy from month to month now and Sept. numbers might just be ‘NOISE’.    To get a clear sign we now await EARNINGS to see if this trend can be changed back to a ‘recovery’ theme.

A 5% fall in 3-4 days can wipe out many of your recent gains,  it’s a pretty clear known in trading that when the broad market falls 5% as it did this time, many of the individual stocks, especially high beta winners will drop twice or three times as much as investors run to take profits in this class first.   Prior to the dime action that saw the market window dressed to 1070, we said,  “Understand though, we're not talking a bounce of 70-80pts here like last time!!.  Use reversal if it comes to lighten up existing positions and/ or just get your daytrader face on for the time being“.      This premise remains till next week,  we may get a bounce as alluded to Friday from the gap,  but if for some reason you’re overexposed, oversized or just didn’t get out during last week's bounce,  use the next bounce to cut down.   Bounce may occur for technical reasons and the fact it’s a pretty mute week for eco’ data.  

Even though AA (7th) kicks off the earnings season this week, the official season kicks off Oct 14th with the Financials  and INTC.    Simply, we are in a neutral bias..this means a “WAIT and SEE mode”.    Considering over 90% of the stocks on our list are below 9EMA,  we don’t find this engaging to do anything other than catch a individual bouncer for a flip trade.    Other trade possibilities this week is to look again for a USD trade,  any weakness is a commodity- linked stock trade possibility.
 

Global Rip..

As an overnight Global market rip flowed into Europe (most exchanges up 2%),  U.S markets had no choice but to follow.  We were actually quite relieved that 1060 proved to be technically troublesome as this is the top of the ‘range bound/ holding pattern (1038-1060) noted yesterday.  The reason is simple, we don’t want the market to get out of hand before the market has a true read on earnings and cause a sell-off on ‘good earnings news’ down the road.   Either way, up or down we go later,  the strong impetus for the market will be earnings and not Aussie interest hikes, talk of 2nd stimulus talk as was the case today.   The real money is not going to chase the market to new highs on a relief rally,  early afternoon,  we had evidence of this as how easily the market can sell off without conviction buying coming in.  

Most importantly in DJIM land,  this relief rally played out perfectly bouncing 40pts from Friday’s gap support levels to unwind positions and make short lived trades.  After seeing the benign G7 statement this weekend in respect to the USD, we entered the week saying look for a USD weakness trade.  It is incredible to see what has ensued as all focus is on FX with Gold ripping,  Aussie / Canadian dollars at highs etc.  

As far as sec’s, strength was broad based.  Our China’ listed stocks, such as HMIN EJ BIDU  were strong.  One of our few retail stocks, TIF  made a nice run to NCH.

As reports start to trickle out this week, the market will begin to get a read on things and start to get a feel for how to position itself, either for upside or downside.   Every report from PBG today to COST tomorrow morning to AA after hours will be dissected by the real money to begin a feel for what lies ahead.

"Golden week" stocks!

A lot of real buying in the morning off AA earnings, Jobless claims #, positive retail curtailed at 1pm off a weak 30yr auction and we finished at SPX 1065.    Well, that’s what the broad market was doing and seeing, we really didn’t notice as our “Golden week’ China stocks had all the fireworks.   Of course, we’re talking about alerted UTA TXIC and TRIT  all running probably with many of the same players behind them. 

There is really not much to add before Friday’s trade,  investors will wait to make bigger commitments when we really kick off earnings next week and begin to get Sept eco data.  

DJIM #41 2009

DJIM #41 weekender will be posted prior to tomorrow's unofficial earnings season kick off.. 

We are 'observing' the Thanksgiving day/ weekend up North.  If anything of interest does pop up today, we'll send out an alert post.  

..Here we go...

Since the NFP report on October 2 and a test of the gap 1016-1018,  the market has seemed ‘bullish’ towards this earnings season or has this rally just been a function of the weak USD ??.   Today, we got up all the way up to 1079, a point off the Sept intraday high with inconclusive  evidence this high is deservingly so, if based on earnings expectations. 

So far, AA  beat forecasts but its ~6% pop was met by sellers (the stock closed up ~2%). RPM  struggled despite beating and raising.  According to Barron’s, “in recent weeks, analysts have raised their estimates for 641 companies and lowered their marks for 383, bringing the positive-to-negative differential to 258 companies, or 17.2% of the S&P 1500.  That's the most bullish in nearly two years. 

Once again we moved higher on a low volume day (under 6bln),  ES traded about 50% of its 10 day average,  as investors wait for week 1 reports which will will be dominated by tech and financials. In tech land, there will be a slew of semis (INTC, AMD, XLNX, ALTR, CY, FCS, ASML, and others), as well as the first major enterprise firm (IBM ), and internet company (GOOG ). In financials, there will be only a few names, but they are some of the industry’s largest (JPM ) starts things off on Wed, GS/C  come Thurs morning, and BAC/GE  are Fri before the bell).  There will also be some important health care companies (JNJ on Tues). 

Interestingly, while we wait for big name earnings, a few DJIM's EPS' were in the headlines AMC with earnings related reports.

ININ – preannounced earnings; sees revs $32-34MM and EPS .28-.31 (St was .15 and $31MM). "Product and services revenues contributed to results for the quarter, both increasing compared to the same period last year," said Interactive Intelligence founder and CEO, Dr. Donald E. Brown. "We received two license orders that were each more than $1 million and eight other orders each worth more than $250,000. Company results were due to strong revenues and continued expense
management."

BWY   acquires BLL’s plastic pail biz, raises guidance – Ball Corp announces sale of plastic pail plant to BWAY Corp for $32MM. BWY guides 4Q and FY adj EBITDA and EPS to high end of guidance range provided in early August; also sees adj FCF exceeding $50MM vs prior guidance of $46-48MM

Best in class now...what than?

The hoopla of Dow 10000 2.0  was almost comical today,  included in this hype is the idea of billions of sidelined money coming off the sidelines in a psychological move once 10,000 is regained.   What many are missing is the inflows of capital since April has been even steeper than back in 2003.  A lot of the money is already in and will continue to flow in the rest of the year.  It's just not going to sunshower all of a sudden because of 10k is our opinion.

Short term….Maybe, it’s the Canadian in us,  but we think it’s a better idea to put on a hockey helmet as we creep closer to SPX 1100  than a Dow 10K 2.0 baseball cap as was the fashion on the trading floor today.   We hope we see some consolidation tomorrow and we hope geo-political noise (Israel saying they will attack Iran after Dec.) does not take away from the earnings parade.  Crude related stocks may be a trade tomorrow on this.   Casinos and China travel co`s may see weakness and be shorts for the day as restrictions are tightened to Macau.  

A trading note…Was there any question we’d do a 10K close?   Well, if you pay attention here you have seen us alert on market direction due to the close in Europe.  Did you notice the discrepancy today at noon when the FTSE CAC  closed?.  Those markets closed up 2% and we were barely up 1%.  As often the case when you have such a differential, the European money comes here and drives us closer to the results across the Atlantic.

As great as it was to see INTC  and JPM  put in amazing numbers,  even CSX  helped the transports.  A drawback is definitely here is the ‘Bar’  has been set very high at the beginning of earning season for financial and techs.    Best in class reports come early, everyone else following starting next week or so has high expectations to meet now.

DJIM #42 2009

The best possible outcome to a kick off in earnings probably occurred last week.  The market had no reason to accelerate upwards any further and it had no reason to sell off.   At the end of the week,  we simply consolidated and now await our niche to begin reporting without worrying what the broad market will do.   Now that real ‘Giants’ reported, except say AAPL/TXN on Monday AMC/ CAT Tues PMKT, we anticipate small caps/ mid caps to bring many surprises to the table as we had glimpses this will occur after a ININ  raise and nice report from an Industrial like CYT  and speciality story plays like QDEL.  So far, 61% of the SPX co’s have reported better revenue which is what the market has it’s eyes on this Q. Stocks like eg. JDAS, STLD EDU, CREE, EQIX  will give us early week reports that will put more light on what companies in our niche may look like this Q. 

So, be patient and don’t get up in the SPX, oil or USD story on a minute to minute/ day to day bumps.  Until niche report cards, we can go trade the commods’ after a higher oil last week and/ or China’s which will have eco data later this upcoming week that will show it’s strength.

As long as we hold recent gap 1079-1075, we don’t have to worry about the broad market as the Bulls hold court above here.

..as sloppy as it gets

If you missed today’s premarket and the bullish reports from AAPL and CAT ,  you missed the highs of the day!.   Expectations of a push over SPX1100 on the heels of those reports didn’t materialize and the failure to do so makes many take some off the table.  

As many scratched their heads and /or pointed to the U.S eco data points as the reason for the tepid start after the opening bell,  we were shorting Brazil’s ETF  and a few of their stocks …“Tomorrow, look for weakness (short term) short opps' in Brazilian stocks/ indicies  due to a 2% impose on capital foreign inflows in an effort to curtail Real`s lift and prevent bubble in their mkt.  Wait to see if this materializes and becomes a noisy issue and spreads as a Global issue.  The short term idea here is US inflows have sustained Brazil's Equity markets and this logically can't make many happy.” .

below: EWZ mid morning swoon.

Simply, these actions would have FX implications and big money knew this would spread to a global issue as the USD would strengthen and push US markets lower.    Surprisingly or intentionally, Briefingcom didn`t even run a story till about 11am and than we saw a big swoon in EWZ (volume spike) as traders piled in and US markets fell as the Dow lost about 70 points quickly back to 10k.  You can easily see the correlation of EWZ and US indexes on a chart mid morning.    As said, this is a short term trade opp`and we used the  added weakness after the stories ran to exit as you rarely see 6% drops in any country's ETF in a day.   Even if this is an unprecedented act on equities by Brazil,  we don't expect this to be a big noise for USD going forward, but who knows.  This act may have other implications or further acts may arise depending if it works or not...so the story may have some noise left in it.

Anyways...the day can be summed in a few words.."sloppy and disappointing" as it relates to pushing above 1100 in the very short term.   We have to wonder what it would take now to get over this wall as we are running out of AAPL and CAT's.  Maybe MS WFC  can bring the financials back from recent underperformance and market react positively.  Otherwise,  watch the Sept peak of 1080 (1079-1075) gap more intently now.

...what's a Bove?

It was 5 trading days ago as DOW caps were in back in vogue, we said, “we think it’s a better idea to put on a hockey helmet as we creep closer to SPX 1100”.   Simply,  this was to avoid getting any hits into the boards as in banging your market head against a 1100 wall too many times and to avoid any concussions as in a sell off sooner than later.   Of course,  in market terms this means don’t be holding too much until we break through the wall.   Hopefully, today we had the helmets on and didn’t get smacked around in the late day ugly sell off with most of the 170 DOW points and 20 SPX coming in an hour. 

Coming off a sloppy day,  we were disappointed by the action and said …“Expectations of a push over SPX1100 on the heels of those reports didn’t materialize and the failure to do so makes many take some off the table”..   The same thing can be said today, another failure  or two in the morning brings out more selling as traders lose patience banging their heads against a wall.    The morning run to SPX 1100 was suspicious and not deserving.   Overseas markets gave no reason for an early move and MS WFC  couldn’t have been the catalysts to breakout.  We were trading the alerted SLM  and weren't really paying attention to a creep towards 1100.    The suspicious factor grew as the studs were hardly moving or in the red.    We’re talking GS, JPM  and the best sub group in financials recently being the Asset Managers BLK, BEN.    If you’re gonna' have a party, you have to know you’re invitation has been accepted by these studs!.   Another failure or two at 1100 and no participation from the GS etc. and it wouldn’t take much else to ruin the day.

What ensued in the afternoon was a bushel of negative things.  We were surprised the TARP 7 actions by the Pay czar didn’t cause a big reaction as we figured Wall street may get pissed off.   Just before this hit the wires, we had WMT give a red light special  in their analyst meetings and post TARP 7 news, we had the Bove WFC downgrade that was construed as the only reason for the sell off as it was going on.   That’s BS,  the broad market doesn’t do an outside day reversal off on a stock downgrade that was already red or flat to this magnitude.   Simply, in our view it was the failure earlier in the day to >1100.   All the other things just added to it! 

BTW, it’s ES futures 1100 that is the real line and we didn‘t even get there!!.  

What’s important is these excuses cited are not FUNDAMENTAL  and give a chance for a bounce if we avoid any FUNDAMENTAL reasons overnight or premkt.  Jobless claims# is fundamental, if you’re wondering what’s the difference.   If we hold 1076 weeks low in the ES overnight and get through the IJC#, we should see a bounce unless those that missed the sell off come scared in the morning and initially add to it.

Fort 1100

Tighten that helmet chin strap..SPX1100 in the futures is in view again!.  But, this time the helmet is not to be on the defensive and to be bounced around,  it's for a possible offensive soon to Fort 1100 for a battle! 

How that happen overnight?.  Well, the market participants can be quite rational after a good nights sleep.  Sooner than later, the market realized there was NO FUNDAMENTAL reason for Wednesdays sell off and once 1075 held (the gap we`ve noted 1079-1075) our beloved underlying bid took over.  There was NO Fundamental reason for the ramp up in the afternoon, a few reasons will be cited, but just like Wednesday's reasons they will be forgotten and the market will act on something new.   

Despite a bunch of DOW co`s positive earnings reports premarket , the market continued to sell off after the opening bell.  Why???.....As we noted, those not involved in the selling in the previous days 1 hour sell off would initially add to it the morning.  The positive DOW reports were being ignored and some calming fundamental eco data, as well.   Why???...  The sentiment was just too awful in the morning after the fast sell off,  nobody except say a place called DJIM was looking for a bounce.   Once we tested the overnight lows and previously noted gap,  the market found it's footing and a reversal was in motion.

Right now, after DOW components eps',  some positive regional bank eps (PNC STI), Cards AXP & COF, most notably…..AMZN's  incredible… huge Q (N.A sales up 23%, International up 33% blew away consensus and Guidance implies 21%-36% revenue growth).…Wait till you see some of the price targets increases on AMZN!.   This upward EPS momentum trend may rest with MSFT for possible follow through or not in the morning.   A second day follow through from the recent underperforming Financials is also needed for a chance to battle at Fort 1100.   It looks better now for sector and the possibility of follow through exists because the Regionals relieved some of the fear generated in them by BAC C credit trends.   Everyone felt better today making this the leading % sector.  

After 2 failed attempts at SPX ES 1100, the Bears will be in force to defend.. 

Gap shredded on volume

SPX 1065--We've pointed out the 1075-1079 gap here,  you can see by chart above how fast it went (bearish technical reversal from Friday confimed).  At ES 1070 (=1075 gap low on SPX cash) over $12bln trades surge in volume!.  Unlike last week when gap tested on 'no fundamental' reasons and gave us reason for a bounce chance that followed next morning, this one coincided with fundamental as in $USD rip and comes with technical damage.

..Tales(s) of the tape

It’s what’s inside that counts, the saying goes!.  You can apply this to the market today.  On the surface the market grazed (off only 3.5 SPX pts) above the 1060-58 gap of October 8th,  yet the underlying market was terrible with widespread deterioration.

Weekend`s edition, we said stick to ‘bigger names’ ..small caps lagging action.  Yesterday…avoid (high beta cheap-outperformers) micro-mid-small caps.  Unfortunately, what we want to avoid is mostly what our DJIM trading list is comprised of.   Today, the selling continued and got aggressive with many of the EPS out performers being rocked…ININ, HMIN, FUQI, TXIC, TRIT, BIDU, WYNN, STEC, AONE  etc.  Some were new earning report related, others sector realted (China), some IPOs.   In the broad market, the TRAN breakdown has the SOX as a partner.    Also, even though we've avoided commodity linked stocks recently, we can't help but notice the damage done in sub groups like steel today.   This type of selling is reminiscent of the days when HF`s dumped at the end of a month(s) in 07-08. As we said yesterday, they are locking in profits as fiscal year end for many is Oct-Nov.   While the selling seems to have abated on the surface, buyers are hesitant to step up until the market finds its support level.  You should as well, if your time horizon for a trade is more than a day.   If you can flip intraday, some names will provide a trade, possibly even tomorrow after their beatings.   A stock like WYNN  that is $20 off highs and has ability to squeeze at anytime is starting to look attractive even as a longer term hold possibility, other smaller beat up names don't have the same characteristics yet.

Also from yesterday…"…be careful jumping into excellent reports with both feet immediately.  Wait for reaction to confirm buyers will still eat up growth stocks".     Today, we alerted a stock with a cautionary…'see if it catches on'.    What we see clearly now from this stock and others is even small caps are going to have a hard time catching a bid from an EPS report in this current environment.  The 'sell on the news' is spreading and we again caution about getting in on a stock early from an EPS report at this point.

SPX has been down 6 of last 8 days and 3 in a row and 1060-58 might be ST support, but the market awaits GDP (Thur) and homebuyers tax credit news/ financial bill etc.   So, while the market box score may look okay on the surface tonight,  there are ominous signals internally that require the above trading basics to stick to.