Ahead of the open, (24-01)

Ahead of Friday’s trade with SPX notching 1315 on SPX, noted the market may meander and not do anything until mid-week/ FOMC date, …“..dip a little or overshoot the resistance some.(10-15 SP handles in either direction)”.  As we close today after a see-saw day, it’s pretty clear the market is pausing the last few days taking in what is an extended January rally.  There is really nothing substantial to take away from today as it was a very slow day with little in the way of catalysts for either side.  The shorts will say the rally is losing momentum and/ or is just fatigued.  It’s a no brainer, it’s a consequence at certain points of a big move, especially when resistance comes into play.  It’s a healthy thing.  Shorts can only back up what they say by putting out fresh positions and there is no proof they have confidence in their words.  Until they can back it up, pullbacks will be shallow and will be bought.

• Away from the broad market picture, small cap earnings got underway with tech continuing to give a brighter picture. The expectation was for not much this Q or next as covered here, but since LLTC, a slew of companies said order books turned up up in the latter part of the Q (late Dec.) as well. The next Q is now exceeding expectations. VMW (strong billings too, good for software in general), VLTR all put in solid reports.

Ahead of the open, (25-01)

Last Thursday the market closed at SP 1314.50, today it closed at 1314.65. The upside/downside has been limited to 8pts both ways from resistance with no catalysts present. Unfortunately, even AAPL’s blow out report will likely have minimal impact as single stock earnings are not moving the broad market this Q. 

Maybe a surprise will emerge from FOMC, or we’ll just have to hope for some end of the month window dressing.  Still, this performance chasing would not bring in ‘long onlys’ to make for a true breakout, a decent pullback is what they are waiting for.  

In this environment, it is probably best to lessen exposure if holding all month and concentrate on single stocks coming out with earnings going forward.

Ahead of the open, (26-01)

Although, U.S eco’ has solidified since the beginning of the year, the FED doesn’t seem to believe it too much. That was the message this afternoon as FOMC/Bernanke ‘surprised’ the market with dovish tone instead of an expected tiliting ‘hawkish’ one. 

Besides pushing out the period of Fed fund rates to be held at near zero to late ’14 instead of mid ’13, Bernanke later hinted it would not take much of disappointment in growth to kick some more QE into gear if these ‘unsatisfactory conditions’ persist. The latter gave momentum to equities/commods’/Gold as the usual effects of QE took hold with USD/TSY downside.

Unfortunately, due to a prolonged ‘ZIRP” all is not so cut and dry as the trade of ’12 reverted back to ’11 in the underlying tape.  If sidelined ‘longs only were waiting for a pullback, today’s events complicated things somewhat as a ‘ safety’ rotation in equities took place with many Financials sub-sectors selling off and ‘safe’ sectors such as Utilites getting a bid.  

Looking ahead, SP 1315 becomes support and a close below will signal a much needed correction is already underway. Until, the odds of some performance anxiety into month end increased.

• URI  PMTC, a few small caps coming in with solid earnings.

Into the trading week, (Jan 30- )

The big event (FOMC) of the last week left investors a little puzzled,….“Although, U.S eco’ has solidified since the beginning of the year, the FED doesn’t seem to believe it too much”.  This question was answered by Friday’s GDP#, which fell below expectations and echoed Bernanke’s ‘retail sales” concern and a big jump in inventory.  It seems someone has a crystal ball!.  A big week of eco’ data is ahead with Global January PMI’s/ISM  kicking things off mid –week.  ‘Good news’ is likely priced in by the market, so the only reaction left may be sell any better than expected numbers next week.

Luckily for the market, bad news was good news as the QE trade offset a sombre economic message and the broad market finished with another week of gains, but off its highs.  As noted Thursday, the market may have hit a rally top at SP1333, which is a monthly down trend-line from Oct. ’07.  Although, the rotation trade of ’12 was back on Friday, it is more a consequence of ‘window dressing ‘in effect.  In this view, a pullback is underway with only QE and month end shenanigans keeping it in check so far.(SP 1316). The pullback size depends on how SP1306 is defended.

Another 20% of the SP reports, a flurry of small caps reports to focus on while market digests the rally.

Ahead of the open, (31-01)

As the calendar flips from January to February on Wednesday, the market continues to exhibit resilience as month end window dressing offsets all else.  As Greece wasn’t a concern over a week ago in this view, Portugal’s eye popping yields are also not a ‘panic’ situation as it’s not (Italy or Spain =true contagion).  Today’s sharp market drop at the open to SP1300 was open season for dip buyers wanting to put January’s rally onto their books for exposure.  SP 1306 was defended as the market edged up from this base in the afternoon closing at ~1315 level negating any real technical damage. 

In all, what was said a week ago still holds true as market meanders (FOMC or not), “ ..dip a little or overshoot the resistance some (10-15 SP handles in either direction)”.  A range bound trade with little selling pressure as it’s been for >1.5 week still persists.  The question is what ground breaking catalyst exists to bring buyers up to the plate in early February to end this holiday –like trading.  It seems everything “good news’ from economic data to earnings to European stability is priced into the market (to SP 1333). 

Ahead of the open, (01-02)

The month end window dressing/ FX hedge rebalancing-allocation chop trade continued with SP 1306 holding to create a close in the recent mid -range of the SP.  The low volume trade may not be notable, but the ‘unsatisfactory conditions’ noted in the FOMC grew from today’s economic data.  Since, (late last week), noted weak housing # GDP #,  today Case Shiller, Chi PMI fell short of short of expectations demonstrating some momentum is waning.  The idea of FED embarking on QE solely on weak numbers at this point is a somewhat careless trade.  This seems to be occurring as market shrugs off the data and holds 20MA.

These recent U.S numbers bring into focus what sparked the rally at the beginning of the year.(Dec.Global PMI’s, inc. U.S' ISM).  Those PMI’s set off the first trade of the year with Coals, Metals, Steels, Ferts’ all up 10-15% in January’....”Commodity linked stocks will be the beneficiary”.   The bar has been set leading into January’s data and it might be a touch high.  So far overnight, China PMI at 50.5 beat expectations and Europe’s was pretty well in-line with ‘flash’ data last week, the ES has spiked 10pts overnight with Europe rallying.  If the PMI’s are the sole reason for the spike, it may be short lived with US data coming up given recent data points.  Shanghai was still down 1% despite their number and downside risk in place if US (ISM, construction spending, ADP) doesn’t live up to expectations and/or the +10pt ES move.

• On the earnings front, two familiar names here came in solid (AZPN FTNT)

Ahead of the open, (02-02)

Nothing new or catalytic caused the gap up.  Global PMI’s just reiterated the consistent ‘growth’, but risk related assets actually lagged some early and then led equities lower by close.  Bank stocks in Europe and here don’t lead off PMI’s as was the case today.  Maybe every financial was rumored to be running the Facebook IPO!.  In all, it wasn’t the standard rotation trade of 2012 as the safety sectors had money flow as well.  Maybe it was just fresh money being deployed broadly and indiscriminately at the start of the month, just to be in the game.

As far as PMI’s, U.S inline numbers were a win –win situation.  If we had ‘better than expected’ headlines, it may have invoked some QE debating.  A weak number and QE aspirations would rise because it would suggest growth is waning.  In those two scenarios today, the market likely would not have gone higher, thus just being inline was enough as it keeps all factors of 2012 going as far as economy (is strong enough) and QE speak (eco’ not robust enough) is concerned.  An example is probably China’s #, it’s PMI curbed easing chatter and it’s market fell 1 % off the ‘better than expected’ print despite ‘hard landing’ off the table.   This chance was noted last week in “better than expected” PMI’s selling off.  The fact it was only China, selling luckily only stayed in Asia.  All in, the bullish macro landscape from December still exists today with CB accommodative policies helping ‘risk on’ around the world, especially in fixing Europe through LTRO, which has brought down Italian and Spanish yields greatly and kept Eurozone economies from falling into pieces.

As good as today seemed, (maybe because it’s one of the few nice gains since the first trading day of the year), we are still about 10 handles off the recent top and in a range tug of war.  

• As far as mid-small cap earnings:  IACI, added last Q and LQDT  had solid earnings in the morning. CVLT also here in November was okay.  MKSI  AH’s was solid.

Ahead of the open, (03-02)

Post Wednesday’s close, noted the very broad based rally that touched even the 'safety' sectors.  The consensus view into the overnight markets was for a follow through day based on the PMI's and Financial leadership (Wednesday) touched on here.  This stretched out to chartists due to RUT, SMH outperformance 2:1 vs. DJIA, SPX , to fresh high's and overall volume pick up indicating accumulation.  The runway was clear for an upwards move.  Yes, these indicators (above) are the usual suspects we’d usually like to see and/or usually see create a breakout (eventually to SPX 1350’s this time, if it occurs).  But, as pointed out since 1333 SPX was hit last Thursday morning and yesterday, the market is in a range tug of war and churning away.  (Do note 1333 trend-line has inched down to 1327’ish), so a take -off seemed imminent, but instead the market decided to take another pause.(ES volume was well below average).   Still, sometimes too much digestion /consolidation leads to fatigue setting in after an elongated range trade.  We could be coming up to that with Friday’s NFP# serving as a catalyst, although it’s not a critical number.  Also, despite evidence of fresh money coming into market yesterday at the beginning of the new month as discussed, it is not necessarily an indication this is the same money that will chase another potential leg up, but instead one that just wants be in the game and live with the little risk in the market.  This type of money also prefers to buy the dips to add.  Considering no market day has had more than a half percent SP downside since December, it’s been a pretty safe environment in 2011, so why not be invested is what that money was likely thinking.  Also, as discussed in early January, it’s best to be invested or miss any good day now as most of market day gains are from morning ‘gap ups’ with little action afterwards like yesterday showed again.   Although, belief is we will break out eventually, it would be healthy if it was later after a correction and not just a shallow pullback (~1.5%) like we’ve seen to the 20ma/1300SPX. 

A few things have played out since 1333 was hit a week ago and the noted top chance:

• Jan24: “..pullbacks will be shallow and will be bought..” (we hit 1300/20MA),..Jan 26, “…SP 1315 close becomes support”..(mkt never closed 1-2pt lower…”closing at ~1315 level negating any real technical damage”..Jan31);. Into Jan 30, “pullback depends if 1306 is defended”..(it’s bounced a few times off this level this week).  These market actions just confirm the markets resilience and presence of dip buyers, also we’ve added 8-9 stocks off earnings to trade off during this range as was the idea until the broad market settles itself…”In this environment, it is probably best to lessen exposure if holding all month and concentrate on single stocks coming out with earnings going forward.”. Jan25.

So while the broad market deliberates, we comprise a list of stocks to trade based on individual earnings in the 1st Q .  We can trade the names now and with confidence further into the year and not worry if the broad market breaks out or not here.  Names accumulated this Q off earnings are mostly previous inclusions; (IACI AZPN  FTNT  LQDT  MKSI  FIRE PMTC  URI  LULU etc.),  while other names just confirmed they should remain on the list for yet another year, if this Q’s # is any indication, ie: (WYNN  LVS  PII  FFIV  FOSL  UA  CRM  VMI MA OTEX  DDD etc.).

As said recently, ‘all good’ seems to be priced in from recent eco’ data exuberance to what was a mediocre earnings season at best to a Eurozone coming out of the hospital.  Another way to look at it is it will be hard for economic data points to surprise  as the bar has been set high, earning trends are known from this Q and we’re a Q away from next and there is more chance of a surprise Eurozone bomb then more morphine to be given out. (We’ll cover the morphine angle with another round of LTRO end of February and ECB’s Super Mario conference next week at a later time).  

If evidence intraday of a 1330+ close post NFP#(150-160k private), we’d add some exposure into weekekend, (*upside surprise could be faded), otherwise keep the top idea in play by concentrating on single stocks coming out of earnings. 

• N, TRMB, SIMO, THO are some to watch early following earnings.  N,SIMO are familiar here, others like TRMB, THO are to spread a trading list into more cyclical plays this year.

Into the trading week, (Feb. 06- )

If there was any doubt about being ‘in the game’, investors got a healthy dose of ‘NFP#’ to move money into U.S equities.  No matter how you dissect the number, it was not only a ‘surprise, but a shock and awe catalyst to the upside. Vegas odds to start the Super bowl with a safety would have been lower than the chance of this 240K+ number.  Add the strong non-ISM at 10am and it was evident there was no way the morning gap was going to be faded early, (no matter how hard Cramer called for one before the bell).  There’s no doubt many money managers wanted the same, but it was no meant to be.  Now the noise will be about consolidating the ~2% SP gains on the week and the even bigger Nasdaq /R2K advances to buy the dip.

Simply, the ‘runway’ was cleared with all the necessary criteria in the underlying market for a successful breakout over the important Oct’07- downward trend-line. In this view, the move was confirmed early by the 300+ new highs being made by single stocks.

Talk will turn to Super bowl ads and to some place called Greece,  so expectation is for some ‘hungover’ trading action to start the week.

Ahead of the open, (07-02)

It’s a struggle to say anything worthwhile on what really was, “Hangover Monday” as a total volume drain masked the markets. Volumes in risk assets were down nearly 30% across the board as traders had no corporate earnings, economic data to attempt a move of any sort. 

Not even “it’s not looking good” for Greece headlines could make a difference today as important yields in Italy/Spain continued with their remarkable recovery since LTRO bailout.  Remember, be cognizant of the Eurozone headlines, but if those yields don’t exhibit stress, contagion fear is in check as far as the markets are concerned.  Markets may just wait on the ECB later this week and what ‘Super Mario’ may hint regarding any ‘longer’>3mts. term liquidity operations post Feb 29 LTRO.   

All in, if this is the beginning of a consolidation period, a breather, we’ll take it!.  The rising trendlines from Dec/Jan in all the major indexes are clearly evident, thus a retracement level on all radars for some dip buying.  On a single stock basis looking at 9ema’s.

Ahead of the open, (08-02)

Minimal losses on Monday, minimal gains on Tuesday. One common factor from both days is dip buyers are not far behind any downside move.  Unfortunately for many of the underinvested wanting to be in the game,  it’s not a patient bunch out there buying the dips.  This makes every pullback extremely shallow.   So far in ’12, this market will not come to you, you have to go get it.  Slowly, but surely the market is working itself to the initial target off the SP1327 trend-line break…”(eventually to SPX 1350’s this time, if it occurs)”.

A relatively quiet start to the week on the macro and corporate front is helping out the directionless trade. Today, if anything, Bernanke echoing last week’s testimony and not ruling out QE following NFP# was enough to turn this market off day lows.  Not much on calendar until Draghi/ECB (Thurs.) and Bernanke speaks again on Friday, (but this time it’s on housing, which might be more important in its relationship to QE/MBS).

A slew of decent earnings to consider this week, some familair past names from here, HAR in '10, TDG a breakout play in '11, 

Ahead of the open, (09-02)

What do you say today at markets close that hasn’t been said all week?.  Well, the daily gains/losses on the higher beta Russell 2000 pretty well sum it up. (R2K ~-3 on Monday: -1 on Tuesday; +1 today at close).  As far as the intraday shenanigans, the market basically gains a few points on ‘optimistic’ Greek headlines and losses a few points on new postponement headlines!.  Unfortunately or is it fortunately, Greece has not been a market ‘factor’ to trade on or off here during the rally.  Maybe, we should just be patient and relax as the pace of gains so far in ’12 can’t go on forever, but this grind is difficult after being accustomed to the high volatility seen last year. Unfortunately, these 2 factors are probably keeping new money out of the market right now. On one side, the investor says these gains can’t keep going, so we’ll wait for a nice dip/correction, while the other battered and frightened investor says, it’s inevitable some bomb will still detonate in Europe!.

Anyways, next few days will be about Central banks speak (as noted last few days) to potentially move the market.

So, what to do in a flattish market with no clear leadership and/or sector to lean on?.  Where’s the alpha to trade on a daily basis?.  Well, it’s not far away , it’s in the earnings reports.  At this point, picking out winners that can be traded initially off a report and/or Shadowlisting going forward in ’12 is the general idea.  Today, HAR/TDG tacked on 4pts between them on day 2 after earnings showing you don’t need to jump on immediately following a report and/or on the gap.  Recall, LQDT gained 9% on day 2 after being posted following its first day of trading with report out.  As far as stocks posted before opening following earnings.  If you can’t trade them fast and take profits early as in high betas like PMTC  MKSI  that spiked and soon relinquished gains, you’ll have opportunities later to get in on a pullback. (ie. today PMTC made a fresh high). Primarily, this is why single stock alerts are not given out any longer, it’s a matter of ones comfort with jumping in and chance a high beta like SIMO  effect as well.

Overall, one thing to watch now is if ‘bigger’ cap names that report burst out of the gate, but soon after give up those gains. This will be a sign the market is getting fatigued with investors looking to take profits now and not chase.

Update on Thursday, February 9, 2012 at 08:39AM by Demi/ YourPersonalTrader

Now TLEO goes, SABA (up >50% since Dec note), KNXA were plays off SFSF deal and could be again.

 

 

 

Dec 5th:

SAP / SFSF deal summary: SAP announced on Saturday that it had entered into a definitive agreement to acquire SuccessFactors  for $40.00 per share representing a 52% premium.

 

TLEO KNXA SABA

Ahead of the open, (10-02)

Anyone expecting a ‘supposed’ Greece agreement to be a market mover was disappointed. Anyone expecting ECB to hint on long term liquidity operations was marginally disappointed as well; Draghi kept it all under his vest, but you’d do the same not to screw up demand for the 36month LTRO on 02/29, (so, it’s not really a surprise).  In all, Draghi was more positive on associated Eurozone risks, which could have been good enough for the market sentiment now, but it wasn’t.  Only thing to materialize was more of the same as another morning dip was bought, swinging the SP a few points above previous days close.(Can you say.. all AAPL!).  Tape gets thinner as R2K slightly underperforms again and in this view CSCO demonstrated the fatigue angle noted to watch off earnings yesterday.  Last week’s note of high expectations bar set: eco’/earnings/ Eurozone possibly being priced in reared its head today with Initial claims/ CSCO/ Greece/ECB being the role players.

Still, although the tape is seemingly going sideways, it’s really gliding and can move into SP1370 this month after hitting our 1350’s target on a breakout from 1327.  The market may have hit July ’11 highs today and a few other possible technical points are inches away for resistance, (but, feels in many ways like it did preceding last week’s breakout, including the negative feeling tired).  Considering the magnitude of the technical breakout that followed last week, which includes many other factors beyond ’07-’10 trend-line break (ie, #of new highs noted) confirming the move, it wouldn’t surprise to tack on more SP points down the road,(Bernanke may/may not help some Friday?).  All in, due to the factors noted above, it just may take more than the very shallow dips we’ve seen this week for this to occur.

Software gave tech/ Nasdaq a bid off the TLEO deal (SABA >6%) and AKAM earnings. Aided softies FTNT FIRE CVLT  here to fresh highs.

In all, stocks Shadowed’ prior to July crash are once again reporting excellent results. (latest ie. RL  WFM  V.)  Also, names like AKAM  have been rebooted by earnings after falling off the list early last year.

Into the trading week, (Feb 13- )

A flat market week concluded with noise over the situation in Greece.  One way to mute the noise is to watch the yields in Italy and Spain as noted for weeks. It was clear the noise was nothing more than fear mongering for now as those ‘contagion’ yields were up 10-12pb signalling calmness.  At the end, it was nothing but an excuse to take some profits for some, while for others it was a reason to buy yet another dip.

Heading into the week, the big picture hasn’t changed.  The premise outlined before Friday’s action remains fully in tact with Greece just an added potential 'resistance mark' on the high bar set market.

Ahead of the open, (14-02)

Market simply reverted back to its 2012 ‘in the game’ ways.  If the investor doesn’t hold overnight, the investor misses on most of the day’s rally as it’s usually all in the morning gap.  If one doesn’t buy the shallow dips, one misses more opportunities to be ‘in the game’.  Although momentum always stalls after gaps, the market feels like SP 1370’s has a magnet attached to it pulling stocks back up from very shallow dips.

As the market retraced all it’s losses from Friday, you have ask what all the noise was about on Friday.  The austerity package passed this weekend as speculated.  All the Euro group wanted on Friday was for this occur to kick off negotiations.  All in, the noise will likely pick up with ‘negotiations’ as soon as Wednesday (finance ministers meet) and last till late (redemption date) March!.

As far as the underlying sectors, all the right groups led on the upside and single stock action from earnings related names this Q continues to be favorable with many new names hitting fresh highs. Names noted include:

...TDG, HAR, TRMB, THO… (IACI AZPN  FTNT FIRE  LQDT  MKSI  N PMTC  URI  LULU etc.),  while other names just confirmed they should remain on the list for yet another year, if this Q’s # is any indication, ie: (WYNN  LVS  PII  FFIV  FOSL  UA  CRM  MA DDD OTEX etc.)