Ahead of the open, (16-02)

Watching the late day surge on Tuesday on a 'Greek pledge’, followed by a further overnight ES surge on recycled China pledge news of support to Europe and you’d think the market had fallen victim to another form of ‘L’insanity'. 

The Greek pledge is irrelevant as all is pointing at a ‘loss of faith’ to keep its word, even a push towards a default/ Euro exit, while the Beijing pledge was not ‘material’ or worthy of the 8-9ES spike as noted ahead of the open.  Simply, the market was exhibiting hot- air exuberance on non- ‘catalytic’ events.   As pointed out recently, the market has likely discounted all eco/earnings/ Eurozone good news and so with little to extend gains on, it begins to make up news as above.

The irrational movements were likely a signal of the rally becoming frothy and led to the sequence of events (below) into the noon hour sell-off start.

• Firstly, China comments were faded by the opening as reality sunk in on this non-event. (Premier had said the same on Tues.)
• Italian/Spanish yields jumped 3%, largest spikes in February/mid Jan. for Spain. This is despite a few auctions going off well last few days, so it raises questions of may lie ahead.
• AAPL dramatic sell off signals a sentiment shift?.

The run up to last year’s highs has likely run its course for the tired market at this point. Dip buyers should be reluctant to step up following today’s events until 1333/1327 is first reached.

Ahead of the open, (17-02)

After all of 4 negative U.S market hours, all is back to 2012 normalcy as being ‘in the game’ theme takes over once again. Back to sounding like a broken record, but hey that’s what it continues to be as SP1370’ is seemingly a magnet as dip buying came around again at ES ~1333, not even waiting for SP cash to hit 1333/1327 trend-line from October’ 07. 

The main driver today was the slew of upbeat eco’ data, although Greece headlines played a role simultaneously premarket. Note Italy/Spain yields were flattish premarket after previous day’s spike. So, despite ES sliding further overnight, there was 'yield' calmness in the air across the pond before any Greek headlines hit.

In all, today it was 'catalytic' news and not made up stuff to provoke an upside move as earlier in the week, which of course is a positive.  Since ‘initial claims’ is a leading indicator, today’s move shows investors started looking ahead, specifically to the next NFP# (which lags) in March. (This is the biggest takeaway today). Throw in an improving Philly Fed survey later and it was off to the races with the weakest sectors last few days catching a bid as well, (industrials, materials, commodity linked stocks).  This fresh upbeat tier 1 data is possibly a tailwind as it’s likely not priced in.  A tired market needed something new and this could be it.

Only caveat today is RUT related, although the small caps outperformed the other major indices, momentum names and earnings plays only tacked on average par gains to the RUT.  Still, this can change quite quickly and outperform everything else.

Into the trading week, Feb.(21- )

Heading into a shortened trading week, market finally has a second Greek aid package in hand and a sell the news effect was the widely expected outcome on Friday.  In this view, an agreement may be discounted, but a sell off as every time before is unlikely as the market has drastically changed since those days.  The details are pretty well in line with what was talked about.  What’s likely more important over the weekend is the news China finally has made an RRR cut in 2012 and now is the lastest country to join the Global easing craze.

After more upbeat US data last week, the focus here will be the mid- week Global ‘Flash’ PMI’s to gauge the health of the ‘Global’ economy. There is no tier 1 eco’ data out of the US, except the next Initial claims number after last week’s # hitting a new cycle low.

In all, market returned to it’s recent buy the dip mentality as of late last week with SP 1370 once again in sight. The only thing to keep in mind is additional gains are limited up to 1370 and beyond heading into back end of the month.  Window dressing will likely also become a factor soon and keep market steady.  Eyes will turn to the 2/29 LTRO and what ECB says or does afterwards.  If anything, a sell on the news will occur after this event to greet the new month, but for now the coast is clear.

Ahead of the open, (22-02)

While the broad market may have cheered the latest Global easing from China by coming within a whisker of May ’11 high  and closing higher for a third consecutive day, it’s underlying market was hardly pretty. Ahead of last Friday’s open, cited..” Only caveat today is RUT related, although the small caps outperformed the other major indices, momentum names and earnings plays only tacked on average par gains to the RUT….”.  On the first trading day of the week, instead of single small cap stocks catching up and outperforming, they underperformed leading the broad RUT to a .7% decline.  Also, rally beta leaders (ie.SMH,(a 2nd straight negative day), homebuilders underperformed the broad market signalling another possible shallow pullback for the market.   It seems every ~20 SP handles or so the market decides to consolidate, digest.  Although, window dressing should help avoid anything more than a shallow pullback into March, what happens post-LTRO less world may get investors looking ahead, offsetting any more upside caused by the dressing phenomenon.  Still, that being said, come March, markets will also want to position ahead of the next NFP#, which could be another robust one following last week’s claims (Thursday claims may fuel this idea further).

The HSBC China ‘PMI’ was okay and so was the European February manufacturing PMI’s, although a tad off expectations.  It won’t be enough to buoy the markets, but aren’t a concern as last month’s jump needs to be digested as part of the European ‘stabilization’ seen into 2012.

Ahead of the open, (23-02)

Today’s trade did nothing to change yesterday’s view for month end. All it really did was show investors are sitting on their hands this week trying to figure out what’s next.  The frothy feeling from last week continued with financials joining in on some profit taking following the RUT,SMH, Homebuilders. The fact SP hangs on while all the beta rally sectors succumb to some lessening of exposure is a positive so far.  Still, RUT/SMH/NDX further losses now put the indices on December to February channel support and /or 20MA.  It looks like it will come down to the Initial claims # on Thursday, if we bounce off support or undergo more of a shallow pullback. Either way, despite the divergences in the market, dip buyers are likely sniffing around for an opportunity to enter.

Ahead of the open, (24-02)

Although the SP may only be up ~2 pts WTD, those dip buyers noted yesterday, “likely sniffing around for an opportunity..” at supports/20ma’s may swing 15-20SP handles quickly thanks to a gift open low to SP1252 with just a little follow through momentum on Friday.  As far as ‘gift’, how else can you explain a market that was given another positive Initial claims #, but slid from gains just before open to lows of day off nothing!  As far as possible momentum into the next trading day, it’s possible due to the reversals seen today, (specifically in the transports),which has been a bear case since mid –month because the sub sector did not confirm Dow’s highs, plus the RUT, which posted the biggest day gains of the majors.  All in, the subdued profit taking in winner beta groups of late reversed (semi’s still lagged).  Still, upward momentum may be limited as next week’s event schedule starts coming into focus.

SXCI, CRM earnings keep these old listed names around for longer as momentum is not waning.

Into the trading week, (Feb 27- )

Despite a slew of divergences going on in the equity/ risk assets, SP closed green for another week.  Throw in a rolling over Dow Transport since mid- February vs. DJIA, spiking Brent, spiking Gasoline and market makes no sense to veterans of the game.   After all the ‘crisis’ we’ve gone through the last ~5 years, it’s no wonder picking up a textbook on investing no longer works in many aspects.  Worldwide QE’s are flooding liquidity into the market place, this wasn’t a section in many texts years gone by.  It (rally since Oct.) will probably end in a commodity linked led correction, but for now the market has shown resiliency day after day.  The whole market seems to be hedged going for VIX –VXX ETF for protection. Protect, but don’t sell single stocks is the game right now.

Heading into the trading week, we have a few hours of window dressing left before the end of European LTRO#2, Bernanke semi -annual testimony (nothing new likely) and Global (gov’t )PMI’s.  After a week or so of quietness as far as newsflow goes, the upcoming week may turn out to be the opposite as ‘Bears’ will likely try to stir things up.

Ahead of the open, (28-02)

It might’ve been a new day, new week, but same market characteristics prevail with dip buyers stepping up. What’s more important is it’s the end of month on the back of a rally (February is >4%) with traders looking to add long exposure when given better prices as early morning losses to last week’s lows were swallowed up. Adding to the reversal was better than expected home sales # with the Homebuilders/Financials leading the charge. (note JPM has analyst day Tuesday and Dimon is usually good for a few market 'confidence' points).  In all, the premise speculated of window dressing last week offsetting any downward momentum was evident and has a few hours remaining, FX hedging also plays a role as part of the overall month end fix.  ( ~4% monthly equity gain should bring in a lower USD).

Today, ‘Bears’ started to try and stir things up on G20/IMF weekend news of failure to grow the ‘firewall’ fund with 1% morning loss.  An easy opportunity and another gift,  if this wasn’t an event you had on your radar with a ‘catalytic’ possibility heading into the trading week.  The possible events of the week were just listed and this feeble event, just after Greece didn’t go up in flames was completely inconsequential.

The ‘aftermath’ following Wednesday LTRO tender is more crucial for this week and beyond.  The consensus is for 500bln demand, but in this view a stronger number, which was viewed as more positive in the first LTRO may prove to be negative as it would suggest banks are still too dependent on the morphine. Overall, it won’t be just a day thing market reaction, but instead will slowly play out into March as we still don’t know what ECB will do later as far as being even more ‘accommodative’.  Even answers to ECB’s SMP going forward is now in question, another LTRO of duration is quite clearly off the table as confidence has been re-established.

Ahead of the open, (29-02)

Only today was the DJIA able to close over the ‘irrelevant’ (in this view) mark of the supposed ‘psychological’ 13k+ after numerous crosses back and forth.  Luckily, it hasn’t been noted here for the past 8 sessions that saw intraday highs above this mark each and every day.  Here, it’s not even ‘psychological’ level, just an excuse for market to chat about something that hasn’t occurred in years.  Here, more importantly SP did have a magnet at SP1370 noted as early as Feb 10 and soon after when SP dipped to ~30 handles lower than today’s close.  “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”.(feb.10). In the past two weeks, DJIA has gone literally nowhere (maybe 100-150pts), while SP has climbed 30-35 handles and even more since the ‘technical’ breakout consequences/importance at SP1327. Interestingly, despite this late February outperformance fact, it’s been the ‘winner’ sectors of ’12 that have corrected the most without hampering the SPX advance at all. This was pointed out in part the other day….”The fact SP hangs on while all the beta rally sectors succumb to some lessening of exposure is a positive so far.” Feb 23.

Still, let’s not fool ourselves; the recent grind has affected individual stocks as the hesitation in the overall market has taken its toll on single stocks as well.  Despite the pause - climb – pause -climb climb since low 1300’s to 1370’s, there has been no panic lately to chase winners, momentum stocks.  Today, we had PCLN, GOOG, AAPL all go at once.  Is this the necessary sign for more gains as traders begin to chase the leaders, momo’s, earnings or was the overall lag in RUT, transports the true tell today.  All in, it’s probably best to wait for the events ahead this week to dictate market direction.

On the eve of the second ‘LTRO’ tender day and the #1 (LTRO #1) reason behind the rally, the question regurgitated here is what happens when the ECB liquidity ‘music stops’ in the weeks ahead.  If the number is inline tomorrow, it may just be anti-climatic (best result) for the time being.  What will the investor do and think later?, if there is only ‘accommodative’ short term durations injections given out going forward.  How much and how long will the confidence flush instilled last before we do it “crisis’ it all over again in the Eurogroup?.

Ahead of the open, (01-03)

Until today in 2012, markets had little in the way of catalysts and stocks have able to glide on Global CB accommodative policies and better economic growth.  “Heading into the trading week, we have a few hours of window dressing left before the end of European LTRO#2, Bernanke semi -annual testimony (nothing new likely) and Global (gov’t )PMI’s.  After a week or so of quietness as far as newsflow goes, the upcoming week may turn out to be the opposite as ‘Bears’ will likely try to stir things up” .  Today, the Bears flew in on the wings of some “hawkish’ bits from CB’s and tried to stir the pot.  In reality, nothing surprising occurred today from LTRO tender to Bernanke’s testimony.  As far as LTRO coming to an end, it was something we’ve talked about for days as no longer durations were hinted by ECB due to their belief LTRO have done the trick and instilled confidence and calmness. (Market will wait on ECB meeting 03-08).  The inline tender today wasn’t the problem, it was just right not to get the markets more riled up by either a much higher or lower number.  As far as Bernanke, the odds of QE3 had already decreased to ~35-45% since FOMC minutes, ‘better than expected’ eco’ data has poured cold water on the idea.  All Bernanke said differently today was inflation expectations may come in ahead of expectations due to crude prices.  Most important to understand is Bernanke/ ECB take their policy cues from the markets and they couldn’t be any better lately, so the idea of more morphine besides ZIRP to ‘14 for U.S isn’t / wasn’t realistic in the next few months.  (Globally, Japan became very accommodative just over a week ago and China is slowly adding ease.). Overall, accommodative policy is still very much in place.

” Eyes will turn to the 2/29 LTRO and what ECB says or does afterwards.  If anything, a sell on the news will occur after this event to greet the new month.” Feb 21.  Add the fact Bernanke didn’t open any more valves and Bears were able to stir things up in commodity land. (GOLD off $100, Silver hit hard as well.).  But, how successful will they be with equities?.   As said the other day, ” It (rally since Oct.) will probably end in a commodity linked led correction, but for now the market has shown resiliency day after day.”.  This speculation relates to the end of LTRO/ Economic growth angle specifically U.S data covered here as a precursor to more’ hawkish’ rhetoric, which in turn may lead to risk assets selling off as is usually the case post-QE’s.   A commodity led correction, but not necessarily one that will take equities down very much!  Despite, equities finally succumbing to some losses late in the day after fighting back to par, the losses were marginal at best when put in context with the commodity hammering. Keep in mind, the VIX-VXX note earlier in the week vs. selling of single stocks. Single stocks held up quite well today showcasing this premise is still alive.

In all, the expectation was for limited upside >1370SP if reached and today is likely enough for a short term 'healthy' pullback.  Let’s get it over with as the market has been fatigued, divergences playing a hand (yesterday’s lag note of RUT/transports included) and build back up to an NFP# on the 03/09 as noted…”……come March, markets will also want to position ahead of the next NFP#, which could be another robust one following last week’s claims (Thursday claims may fuel this idea further).”.Feb.22.

Global PMI's, US ISM on deck, last weeks 'flash' PMI's should be duplicated and come inline. No reason they shouldn't, US ISM should as well as regionals have been strong. Initial Claims may have more of an influence leading into NFP#.

Ahead of the open, (02-03)

After an eye opening commodity slide Wednesday morning, all the market needed was a good night’s dream about buying the good ole’ dip.   Of course, it wasn’t all that, but when you’re an investor/trader confused about ‘free money’ awash in the markets vs. economic growth dilemma going forward, hey just buy the dip and move on!.   The above question will linger on; can markets live with one and not the other and/or how much of each is sufficient to keep markets rolling.   This should be enough to drive one crazy with over analysis in the weeks to come.  In this view,  …”Overall, accommodative policy is still very much in place”…and economic growth is sufficient enough at this point, so not going to fret over it.  Sort of like the premise here for months of being cognizant of European headlines, but don’t let it keep you away from equities.

An interesting reaction to eco' data today. As said for days, economic ‘better than expected’ has probably had its day in the short term.  Besides the Initial claims today, (whose 4 week average has dropped by a significant 20K since the end of January), other data in the US is coming in softer this week.  Yes, the US ISM was a surprise considering almost all regionals were strong in February.  Durable goods, real consumption were softer too, yet market tried to hit fresh highs intraday signifying a belief by investors of the recovery holding.  Recall, noted earlier Global PMI gains would need to be consolidated following last ‘flash PMI’s and that’s what it looks like has happened again, here and abroad…. “… It (PMI’s) won’t be enough to buoy the markets, but aren’t a concern as last month’s jump needs to be digested….” Feb 22.  All in, it looks like it’s all about ‘Jobs, Jobs’ into March 9 allowing ‘softer’ data to be a blip for now.  Today’s tape almost going back to yesterday’s highs intraday is almost a disappointment as chance for a shallow pullback to buy into NFP# was short lived as Bears were unable to stir things up for longer than an hour or two. (after no promises of morphine and what could have been construed as disappointing data today.)  Instead, a potentially robust NFP# becomes the focus giving little chance to a pullback beforehand now and instead likely more upside risk.

Overall, the day started very encouragingly. Transports continued the reversal noted last week, single stock action in the RUT was very good with many names followed hitting fresh 2012 highs or flirting with such on 3-5% gains, which have become a rarity… ie.WYNN PII LULU UA IACI FOSL LVS FTNT and outside the group the momo/earnings, GS JPM might be prelude to more upside ahead in the Financials.  This is the kind of action you like to see and the type we’ve been waiting for as discussed lately. (including disappointing RUT vs. SP performance of late.)  Unfortunately, RUT gave up 10pts after 2pm and ended up lagging once again, while SP, NASDAQ managed to keep gains.  Still, as long as closely followed stocks here perform, the mixed signals even in the RUT are better ignored.

Into the trading week, (Mar. 5- )

The last 2 days, we’ve looked at the possible market implications in detail arising from Central banks actions or non-actions to what is perceived by some as a halt in better economic data.   All this is intertwined into Friday’s NFP# to shed some light and more debate over QE and the recovery.   Again, it’s all about ‘Jobs, Jobs’ now and there is not much to add at this point. 

As far the underlying market, once again RUT underperformed on Friday to end with a 3% loss on the week.  It seems it’s the one ETF/ index shorts had a chance to play (technically), individual stocks followed here fitting into this space were not for sale on Friday’s first technical negative on the RUT as it broke down from Feb. range.   All in, unfortunately we probably have to sit through 3-4 days of possible churning as there is little in the way of anything fundamental coming out ahead of NFP#.

There is nothing material over the weekend and/or at Asian market openings. Ahead, AAPL’s event might be one of the only market highlight in between (Wednesday) and if the SP tugboat of 2012 sells off on the news, we may see the waning momentum speed up. Also, ECB meet up on Thursday is one of about 10 CB’s meetings globally this week to fill some market airspace.

Ahead of the open, (06-03)

All signs today of a market grappling with ramifications of no massive QE ahead and if economic recovery can survive without it.  NFP# gaining more importance by the hour.  In the meantime today, market was full of excuses to do some profit taking using incremental news; ie, such as making China growth outlook announcement sound like a negative surprise, which it wasn’t it as consensus was already @7.5%.  In this view, it wasn't a material market driver heading into the week note and still isn't despite the market noise it supposedly provoked.  Basic resources/base metals losses started in Europe and expanded in most ‘economically sensitive’ sectors in U.S markets.  Do note, Nat.gas had a hand in crushing coal stocks and downgrades to Ferts’ made the casualty list grow in commodity land, so it wasn't pure 'China' news.  Non-Manufacturing global services PMI’s (excluding US that came in better), were more of the ‘digestion' of a few months gains as discussed recently with softer eco’ data out, so not a surprise here.

A ‘healthy’ pullback was the hope last week heading into the NFP#, but a head fake took place with Thursday’s upside reversal.  A few days later and now a 2 day/~20SP drop off '12 highs at today's intraday lows.  The RUT  breakdown gave shorts some confidence and today, it was go after the next similar ‘technically’ susceptible group. (SOX off ~2.55%).  Also, noted the possible sell AAPL on the news as one highlight between here and NFP# got underway early, adding to negativity as it’s responsible for something like ~12-15% of the SP gains this year. 

In all, at day’s lows market was still ~10 points off real ‘support’ levels (SP 1348-1350) with small caps(RUT) the only green as it bounced near 50ma.  SOX will test area next.  To put the downside into perspective so far, the drop off recent highs is still like 13 points shy of this year’s biggest/longest pullback back in January and that 3 day event hardly put a dent in the market.   This dip is hardly a shallow pullback so far and definitely not a ‘healthy’ one at this point. Only difference is dip buyers are a little more hesitant to step up the last few days as Dec.channel breaks/ 20ma come into play.   DJIA reversed and SP ticked off 20MA/ lower channel support due to rotation into safer groups away from beta.  The NFP# hype should bring in some buying soon.   All in, if excuses and not true market drivers are cited for falls, it usually is reversed quite quickly.

Ahead of the open, (07-03)

Approximately 100 SP handles lower as of Monday’s close, the New Year markets were shooting out of the gate off Global  PMI’s..”....U.S markets only followed what was a concerted effort by Global markets already underway for 1 or 2 sessions depending on the region.(Germany up 5% now, Brazil, India >3-4%”.   Soon after China rolled in and many emerging markets were on their way to double digit gains as of late February, ”China (Shang ‘index) getting on track... jumping 2.9%. Shanghai index was a wary noted yesterday. If this is the beginning of a reversal in the China market, it’s a very good sign for U.S markets to go higher as risky assets would rise out of better China sentiment’.(early Jan)

Now almost 2 months later to the day, it is the emerging markets garnering attention here with ie, Hang Seng, India, Australia, off 3-4% in just a couple of days in March.  Simply, it’s garnering attention because it’s close to being the opposite of January beginnings as U.S markets followed emerging markets to the downside this time with an open down to SP support levels of 1348-1350.

“It (rally since Oct.) will probably end in a commodity linked led correction, but for now the market has shown resiliency day after day”, (02-26).   So far the pullback is a reflection of emerging markets and the commodity link.  On Monday, it was Basic resources, Base metals and today Precious metals got crunched into the open.  The most notable ingredient for the fall is likely the end of massive doses of morphine from ECB as speculated into March, not China’s forecast.   An added headwind caveat today is the 10yr yields in European peripherals on Greek swap concerns. LTRO tender aftermath should still hold these in check, so today’s move is a little concerning.   ”…Overall, it (tender)won’t just a day thing market reaction, but instead will slowly play out into March as we still don’t know what ECB will do later as far as being even more ‘accommodative’.  Even answers to ECB’s SMP going forward is now in question, another LTRO of duration is quite clearly off the table as confidence has been re-established”.  

As of the market open, this is setting up to what was speculated here, a window dressing trade holding market into late February, a LTRO less ‘shallow pullback’ reaction early March and then positioning into NFP#.   The only bump so far was the head fake reversal day last Thursday, which made upside risk likely and a shallow pullback unlikely ahead of NFP#.  Instead a pullback resumed a day later and now is 3 days old. 

Last Thursday before reversal day…“In all, the expectation was for limited upside >1370SP if reached and today is likely enough for a short term 'healthy' pullback.  Let’s get it over with as the market has been fatigued, divergences playing a hand (yesterday’s lag note of RUT/transports included) and build back up to an NFP# on 09/03..”.  Only drawback is the market is cutting it close to NFP# date by not giving enough time to digest week’s events/losses and the ‘shock’ of actually having a 3 digit DJIA loss after a ~45 day streak of not having one!;).   A little wink there, but the market is spoiled and complacent. 

Question now, is it better to wait on NFP#’s now or buy the dip now below broken support???.  In all, technically the dominos have been falling for days,  RUT>SOX leads to COMPQ/NDX> leads to SP,(now below 20ma benchmark), so its' price activity tensions here and in Global indexes causing selling and not the numerous excuses floating around for the slide.  Being the case, dip buyers may stay away this afternoon, instead of showing off the market's resiliency as in recent past.  Excuses can be bought, but its the price performance which is overshadowing things now.  Still, if you believe in the recovery, it's hard not get in on a ~35SP move off highs in front of the NFP# sooner than later.

Ahead of the open, (08-03)

After a few days of hesitation on the part of dip buyers, (who could blame them with the poor performance of index prices here and abroad), they’re back as market drivers floating around were nothing more than ‘excuses’ for a tired market as discussed last 2 journals.

It all started with the ADP# and followed by the WSJ article on QE twist 2 potential and realization, at least for today  …”Overall, accommodative policy is still very much in place”… and economic growth is sufficient enough at this point”.

Despite, a few upside risks on Thursday, such as ECB speak post LTRO / Greek swap / NFP# ahead, the poor price performance talked about needs to revert. 

Otherwise, the upside risk could become priced in, if market attempts to make it back to this year’s highs.  The likely possibility is investors tripped up this week will want to take profits off this time around.  First resistance will likey be at 61.8% retrace of the SP2.6% fall from high to low.