..pulling in the reigns on Dasher, Dancer, Prancer....

Mid - December, we noted..

“Right now, last weeks high of 918+ got walled today and so is the battle line……Still, we may need a 'new catalyst'  to move forward it seems, 918 has to fall soon or Bears will use this failure as a reason to call an end to this rally.”

What happened after was the market grinded slowly back down to a low 857 SPX a couple of times,  the latest hit on 857 just this Monday.   That pretty well puts the rally this week into perspective as we hit 910.    That’s over 50 pts in a matter of hours and with 918 within striking distance,  we felt it was time to go back into cash and just keep an eye on things.    The strategy here since last week went to script with the E&P’s (and Financials/ brokers , GS making multi week highs led leading the way.    Simply, we all can afford now to jump off Santa’s sleigh after jacking it for a joyride and sit back and watch if we break 918.   We still need a “new catalyst” ,  in our view, a low attendance holiday trade is not it.    Also, as we’ve pointed in the past the corporate ‘ bad’ news always seems to have a gag order in place over the holidays.   We don’t want to wake up come Friday or Monday and get surprised with a negative PR at this point. 

Yeah....trust and confidence is just not there for the market participants and we'd like to begin the year off trading on the right foot.

Sober up time coming?

Those coming back to the market and now finding the SPX up nearly 20% (from 11/20) didn’t help the market sober up from it’s holiday cheer.   Despite new potential tax cuts of 300bln + , we still opened weak and finished in the red.  (We had a test of 918-919SPX early and rebounded).   The market was generally flat tape with exuberance for bargain shopping evident throughout our previously shadow-listed commodity stocks.   Again, we saw beaten down prices of Shippers, coal, solars get eaten up, while the E & P Shales continued their merry way with Oil climbing closer to $50 ( some of this  also b/c of a XOM for CHK rumor).   All this with a strong $USD should have brought commodity equities down as it did with the price of gold.   Instead, we just got more and more buying of equities on sale from 2008 inventory as those coming late are seemingly chasing ahead of any news from Washington.

At his point,  it seems best not to fight the positive tape, even geopolitical tensions are being ignored as markets worldwide keep rising.   But,  we think it is just a matter of time before analysts get back to their desks and start cutting many sectors/ equities on valuation such as the Solars, Shippers to bring them back to reality.   AMC, MOS (Chem-AG’) reported and should trade down sector, but AH’s is no indication of that happening.  We’d say wait for firms to have a say and than see the reaction.   Based on below-consensus 2Q:F09 and EPS and the negative near-term EPS implications of planned production cuts, profit taking should occur.  Persistent weak customer demand is seen and the company is reducing its potash production by up to one million tonnes in the second half of F2009 and reieterated its willingness to further reduce phosphate production up to one million tonnes through F2009.  

We think a sobriety test from the holiday mode is just around the corner and we’re looking for short candidates in the sectors above. 

Volume still not back to normal levels.

Where's the next resistance?

Second day into the trading week, market again exhibited some very strong action.   Overall, today's volume is better than the last few trading days, but the late day sell- off to finish 935SPX may suggest some more downside in the morning.   The question though, still remains, are we due for a pullback?    Up to this point, some of the individual plays have been going through one of the best run-ups during last three months.    If last week was not a holiday week,  then this would've been easily considered the best rally since summer.   The rally has been working pretty well in unison with the recovery in treasuries for some reason.  Overall,  we are seeing a return to risk within all the markets which bodes well heading forward.

Here's the problem for those who want to chase though.    The volume has been below normal and price action has been literally straight up.    Yes, you can point out the fact that today's volume is much improved and price action held up pretty well.    However, we did note some weakness in crude price (tried to rally to ~50 again, but maybe is hitting a wall here)...commodity stocks, a weaker USD and a pullback in treasuries in tandem as the day progressed.   Watch if this combo continues to halt this melt -up.    If this market wants a chance to see SPX 1000, (there is not much resistance above),  we better pullback some and build a tough support.    This is a tricky week as this is officially the start of the "earning warning" period.  We've had a bunch of small  tech names warn already this week, but the semi's/ hardware were probably best actors today.  So, it's the bigger names that we'll determine course.  Thsi may become the resistance if a noteworthy co' reports one.   As far as reaction so far to earnings,  we saw a quick 8% drop (high 44's) in MOS from pre-mkt prices, yet it recovered.   After this watching action,  we can't say this is going to be a repeat of last Q when stocks earnings were priced in and even a bad report made a stock go up, ( notably Steel stocks ).  We're simply not convinced by MOS's bounce action, just yet.

It's also much too soon to believe the idea that "market is discarding all the bad news" because we really haven't had any bad news 2-3 trading days into the 2009.

Right now,  with the way market behaviour last couple of days,  we can't discount the possibility that it'd go even higher without a meaningful pullback and the premise of not fighting the tape may still hold.  However, given the high probability of an immediate pullback, we are definitely not comfortable chasing anything again on strength.  The only notable strong ones with a good setup out there are the insurance co. like HIG PRU.  This class performing well probably because credit market performance has improved and further measures could be taken in an effort to further bolster credit markets and/or just a bunch short covering as we are seeing the past few days all over the market.   They actually had a pretty good base since the last breakout and we feel there might be some more upside if this market holds up.

Bottom line, it can be frustrating sometimes when the market isn't behaving the way according to your gut feeling.     Therefore, it's even more important now to trade off the facts than any emotional swing.

..complacency hurts

Sometimes it’s better to be a little early than late.   The premise at DJIM of ‘ bad news’, gag off come New Year and therefore establishing short positions paid off handsomely today,  despite a few days of nail biting, head scratching as this melt up continued without any real Bank stocks involvement.     As we said, it’s important to trade on facts and not emotional swings as in chasing the lot.    We had plenty of crucial facts to the markets fate for the day and alerted them into the open.    Fortunately, the market had the ‘sobriety’ test and it was even better than expected in the form of a meltdown of 3% across the broad indices as volumes start to come back.    Not only was SPX918 humbled, 900 a big mark came into focus and luckily held up at close for now.   We don’t think it will hold this week as more bad facts to be wake up to might be around the corner .  This is something we said at the end of last week, we don’t want!.  Surprises !.  Some will say today was profit taking...yeah, it was..... but it came with realization and fear once again that it simply sucks out there in the real world and therefore not just simple profit taking.

Coming into the trading day,  we highlighted/ underlined on site that we were seeing a tandem  at work with Oil seemingly hitting a 50 wall and weakness appearing in commodity equities into the previous days close.   Crude fell over 10% today and it took those equities/ commod`sectors...  Ships, coals etc. to the shed and will continue to if crude is becoming bearish once again.    As far as the broad market,  a frightening ADP number followed by the timely INTC news answered our journal title of where the next resistance is…..This is a tricky week as this is officially the start of the "earning warning" period.  We've had a bunch of small  tech names warn already this week, but the semi's/ hardware were probably best actors today.  So, it's the bigger names that we'll determine course.  This may become the resistance if a noteworthy co' reports one.

The reason we alerted the ADP, INTC (we don’t very often release such events) is we thought they were noteworthy because the market had become “COMPLACENT’ in thinking everything is priced into the market,  including economic and corporate news after the last Q.      Don’t forget INTC already cut from 10.1bln in November to 9.3 and now to 8.2.   That’s a big shift and we will see more of this, so those ignoring and becoming complacent are going to get hit down the road if they don’t smarten up.    This was a cold shower awakening that it could get even nastier.    Despite all the lowered guidance from co’s and analysts,  we still think the numbers may get worse than anyone thinks.

The only positive was MON and a huge squeeze as analysts had become quite bearish on the company lately.   We want to point out this has little to do with rest of sector and eventually the crude factor if bearish will knock the other Ag-chem stocks down.   Around 40c of the difference in estimates from the street were glyphosphate profits and MON biggest competitor is Dupont.   This report has little to do with how bad MOS’s really was.

Right now,  the focus has to be to close 900SPX+ for any bullish sentiment to remain short term.  The fear we had going into this weak has been put back in quite a few today that had become complacent.  The effects are they will now be waiting for more ‘bad news’ and this market may have a hard time fighting back beacuse of it…Obama inauguration or not.

DJIM #2 2009

The market continues its zig and zag ways with 5 trading days left to zig it’s way back up before Inauguration.   For all those previously thinking of an Inaug’ rally of sorts may have received the best possibility of one because of the mkts 4+% slide last week.   We couldn’t have a Santa rally immediately turn into a Inaug’ rally,  so maybe last weeks zag presented this opportunity.   As expected here mid-week,  SPX slid through 900 on what was a very dull trading day with a close right at the more crucial 888 / 50ma.   After what seemed like weeks of discussion regarding the jobs report,  it was basically shrugged off by traders come Friday.   Barring any bad weekend news,  it will be critical to watch if we can regain strength from this support level early on.   Clearly,  the focus has changed as ‘bad news’ has been sold off, a shift from what we saw last Q.    Right now the broad market feeling is this is purely a Bear Market rally we have experienced as any strength now has created a selling opportunity for many it seems.   Some of the moves have been too great in many a beaten stock and sector and those holding are realizing it’s best these 20-30% individual stocks gains are taken off the table before it's too late.

The focus turns to earnings reports this week,  we also have potential M&A activity with MS-C providing a backdrop to the Inaug’ talk.   During the most recent kick up the banks were missing auspiciously from the rally and as we always say , anything worthwhile needs them to work as well.   The M&A noise may provide some juice, at least that’s what we will be monitoring for as well.   Unfortunately, there is bad noise from UBS/Deutsche side to mute this to start the week.

Until we see more,  we remain neutral heading into this trading week.   The questions are arising as to the sustainability of this rally and many an answer will probably present itself this week with earnings the key factor.   If there is no more shrugging off bad news here, we’ll have a failed rally on our hands and will turn quite bearish.   So, watch for guidance and the market reaction to the results.    It’s a simple start to a busy news flow week and we‘ll know if what we saw last week was just a pause or another failed rally.

..choppy slop

Not much you can make of such a sloppy choppy day with the SPX in a tight 10-15 pt range.  A possible positive is this market may finally have some formidable support at 860,  it bounced many times here throughout the day.  But, we've been through this before recently at higher levels only to see a level such as the 50MA blown through easily.   So, the guard must remain up, choopy slop can turn to mud quite quickly!

Overall,  it seems everything that started this rally back on Nov 21 is screwing with the market in one way or another from the Geithner nomination (housekeeper) to the stimulus ( push back date) to TARP (revisions) all making some kind of negative noise.   Doesn't seem like much, but the market maybe adding all these things up and asking can you do anything right?.

We did see some of the bounces in the beaten down commodity stocks just discussed yesterday, energy was positive in the S&P leading to a higher $CRX/ CRB.  Still, this is mostly a one day up, one day down trade starting from overnight $USD/ crude prices and getting any thoughts of a strong position for more than 24-48hrs is almost useless.  Also, DOE inventory Wednesday to watch.

As far as what looked like a safe sector/earnings story (APOL) got Citron'd.    Not dwelling into the specifics of report,  only think this is maybe more than Citron can chew.   Most of their victims have been very small fish with little institutional support (basically unknown retail plays).   APOL is a much bigger fish with institutional interest at about 80% with 15-17 analysts doing coverage.  This is probably why the stock finished only 5% down on such a high vol. turnover. 

Anyways, patiance is needed here in the broad markets as this is either a low here and we start to bounce within this recent range or the market becomes mud soon.   A closer watch on Euro mkts now as a lead to trading here throughout the day,  their banks are muddying the waters, noted Deutsche Bank/ UBS the other day as negative noise.

....take off?

Not everything had a bad take-off in NYC today,  maybe if flight 1589 had used runway SPX 820 like Wall Street,  the miraculous event may not have happened at all.    To be completely honest and to put the rally into context,  we were glued to the unfolding events in the Hudson,  not the last 30 minutes of trading on the market!.    As we noted in Journal and early post, the level the watch for action around 820 unfolded later as the oversold market bounced hard off support at SPX (cash) 816-818.   Preparation is always key to trading.    If the market breaks a support level, you say 'oh well (chit)',  otherwise you have to be watching closely & continuosly as a trader to see if something materializes as it did today to profit.     Simply,  everything that had to be done trading was done by 3:30,  which included selling any intraday and/or old positions as this was nothing more than a short covering rally off way oversold levels.    This doesn’t mean this melt -up can’t continue tomorrow,  it just means it has done little so far to make one think it can last more than a few days.    Once SPX 50ema turned up Monday,  it was a very bearish sign to break that level as it finally had just 'turned up' in contrast to breaking support off a downward MA.    There will be lots of talk what turned the market today,  included is the dismissed idea of nationalizing Citigroup,  but it really doesn’t matter what noise helped,  other than realize it was ‘technical’ on all levels!.      We also had, (yesterdays Journal)…’Intraday swings are more likely to return in this environment…up and down”.   Well, the swings are back as witnessed and that just pounds in the fact we won’t be able to sustain a long term move upwards.    This is probably the time again to just watch the sectors/ stocks off our shadowlist and trade whatever is moving that day until (if) we get something to trade off earning reports or just trade the DJIA/SPX ETF’s off major support and resistance levels.

They're back!!...There is an ominous side to the current trading environment and that is hedge fund redemptions have not gone away!.   The headline read, “ Investors pulled close to a net $150bn from hedge funds last month in spite of moves by dozens of funds to halt or suspend redemptions; “We expected December hedge fund redemptions to be significant, but the results are still surprising ... twice the peak equity mutual fund outflows in September at $72bn,” .   This will continue to be an overhang into the market and you have to think any sustained rally will be shot down on more redemptions sooner than later.    As we said day 1 of what has turned into a daily saga, ‘Bernie the Ripper’ will cause investor confidence to shatter and it’s only natural money is now being pulled out of Hedgies hands.

On the bright side,  the recent overhang of the Washington stories... Stimulus, TARP etc got a boost yesterday.   The apple of our eyes was APOL   squeezing the juice out of Citron and its' report,  we spoke in detail of the fact,  we thought APOL was too big of a fish for Citron to hook and sink.   The stock was already performing well today ahead of the released stimulus plan and despite another Citron report on it,  it rocketed as the education part of plan was digested.    The bill was positive for-profit education services companies, with the group’s average rising 8%.  You can attribute the strength to investors’ excitement about the additional pricing power for companies if the bill is passed as is.   The stocks that outperformed the most are the ones with the highest exposure to private loans,  which are not federally backed and remain largely unavailable, such as ESI  (shadow list it) and add to APOL, STRA in this group.   Still, additional steps need to take place before it even gets approved,  but the markets exuberance cannot be contained if there is almost nothing else to trade sector wise.   We'll see.   Market doesn’t always trade on finalized facts,  just like it took all infrastructure stocks up recently without knowing which company will be the big winner or when the money will show up on the bottom line.

Have a good long weekend!.

..puff the magic dragon..where you go?

In the middle of the latest rally as the market came to ~940 SPX,  we wrote in the first journal, (DJIM #1 2009), we believe we will see SPX go back down to low 800 at some point during the year.”.   Little did we think,  ‘later in the year’ would be 11 trading days later. 

Expectation was with a few hiccups 1000 SPX would be reached sometime at the end of first Q of 2009 and than a fall to 800, maybe 750 before all the Obama economics and gov’t intervention of 2008 would lead to a rally back to 1000 or higher later in the year.    Right now,  the only hope is all this has been sandwiched closer together and a rally, maybe not the yet expected later in the year,  but still one of significance as 800/ 750 present the low range of this range bound market we see (750-800 to 1000 SPX).   Unfortunately these levels are coming at a very nervous time with banks globally under heavy pressure (BKX down 20% and at levels not seen since the early '90s) and we‘re in the middle of earnings season that is expected to stink up the already stinky joint.   Financial co’s are now less than 10% of the SPX index
 
All this on inauguration day,  maybe at the end of the day it was a deserving welcome considering the new president’s first 'puff'  act just hours after taking office is to halt Guantanamo trials.. Come on, really, this is not what the market needs or wants to smoke after an already non-inspiring market speech earlier in the day.!

Yesterday, we said the building crisis was sort of saved by the long weekend, today there was nothing to save the financial collapse as we picked up just where left off on Friday.  There was no Obama magic dragon rally many had their sights on in blog land. at least.  There was only many unanswered questions as to what must or can be done to save the banks.    Please..if a relief rally (maybe imminent) occurs ,  don’t call it an Obama rally if it happens!.   We were just at 860SPX cash Sunday night as many moved ahead with their losing calls into inauguration,  only to be blown apart by global banking news soon after.   It will just be an oversold to lower range bounce, if we get one.   The giant headlines, news flow will continue to flow out of Washington and the U.K, the time to be short would have in anticipation of the gag coming off into 2009 from 900’s SPX and not now even if the headlines are ominous from the banking sector.    The magnitude of selling seen the past few days shouldn’t last.   It is best to be prepared for a bounce this week from these levels not seen since November.    The difference now to November is what seems to be a stronger credit market with spreads tighter and issuance stronger.  Iif this is truly a positive than stocks are close to buy range in this range bound market.   If there changes in the credit market going forward this year, say goodbye to this lower 750-800 PX range.

Also as we get closer to February and earnings from steel and solar names come before us, we’d look at any rally to short these sector equities.    In the meantime, we focus on this weeks big tech earnings and hope more are like IBM’s (good luck!),  GE is also on deck, it is worrisome this behemoth is being shorted to seemingly oblivion these past few trading days.

dialing.....1-'(800)'-$SPX

Almost everything on the market today answered yesterdays “ coming around?” question.   All we wanted was to for the market to stabilize and not display the wild gyrations we’ve seen this short trading week.  Instead,  we got more of the same volatility answering the suspicion that Wednesdays bounce was nothing but short covering.    Despite some earning bright stars this week in IBM and AAPL after mkt close,  the mkt got stunk by an early wake up call from an unexpected source (MSFT).   

Talk about something getting in your cereal and causing a sale sign to go up on everything by the opening bell.   As bad as MSFT was,  you have to read over CNH’s  report (Alert sent out on machinery sec) to see how '09 is shaping up as for this sector.    Besides the big miss,  the company did not provide any 2009 EPS guidance,  which is a negative in our view and a sign of the uncertainty in 2009.    Negative follow through extended to CAT  (reports Monday), MTW, TEX and ag’ equipment like DE and pure infrastructure stocks like JEC, FLR got rattled from the bell as well.   Besides noting a short in the machinery sector,  we were jumping off and turning on Education stocks (ESI, APOL ) at their highs.   This is a place we’d usually be adding to positions in the past,  instead , we slanted to the downside thinking breaking out successfully in this environment maybe a useless proposition.   Of course,   we still like this safe sector and these earnings winners,  but we’ll wait for a pullback to come back long and attempt a breakout.  After holding all day during the market declines, they succumbed some finally into the close.

As far as the mid day rally, what rally really?.  It lasted 1 hour and probably was nothing more than another short covering attempt.    In a short covering rally, you don’t have “whales” buying.   There is no institutional buying Wednesday or today from what we are hearing.   A blink of hope was given by GS, JPM during a Financial slide of nearly 6% on the day.   Insurance firms took brunt of the punishment today.  

This is a confused market,  let’s hope GE doesn’t say something too negative going forward in the morning to add to the downward pressure coming from every sector today.    It’s very much a technical market, so keep eye on 800 SPX area as most important level now, we’re nowhere close to the 50ma .

Deflating

With some Asian markets closed (light futures trade) and a relieved (squeezing bank sector), European market led to the US markets flying out of the gate.    A sugar coated open and nothing else.   Unfortunately,  as the previous 7 trading days indicated a breakout over 850 high or 800 low on the PSX is proving to be insurmountable for the Bulls and Bears, respectively.    A 'catalyst'  is deeply needed as the Bull and Bear and their two man saw grind this market into woodchips and sawdust.   At his point ETF traders of the eg. SPY are getting blown to pieces if they are not quick to act.    Any move is not sustainable even for a few hours,  direction changes constantly.    While this battle or better put,  lack of conviction  on both sides plays out , we wait for catalyst.   Financials couldn’t  keep up to the European squeeze and Crude peaked ~48 and fizzled away gains by close for most of those components as well.    In the meantime,  we’ll continue to be selective and hopefully put a few more points on the scorecard in individual plays/ sectors.    Example of going long education stocks and than shorting at their highs when we said it was not probable for them to breakout.   Today,  you were laughing if you kept tight the ESI down to 110 from 130, APOL to 79 from high 80’s in a just a few days.  Now that they have pull-backed,  we start thinking long again with these names.     The premise of shorting  CAT as a machinery sector play last week proved to be a premkt highlight story off earnings with the stock sinking to a $30 low.

The 850+ is looking to be a tough task to the upside, (simply the bulls failed today), maybe even 840 is too much as todays move just petered out,  even with better eco data.   The thousands of jobs cuts in household names hit home, if they hadn't yet.   Somehow when you see high profile corporations slash jobs in the thousands practically all at one,  it rings worse to many than a non payroll number or creeping up unemployment rate in percentage terms month after month.

No direction,  no conviction,  maybe until more headlines hit speculating on the TARP II/"bad bank/ stimulus.   Earnings still setting a negative tone (CAT latest),  as we hit the busiest stretch of announcements.

..still just a ripple

The ripple effect of closing and basing the previous week from 800 lows manifested into a rally today that finally shredded the 850SPX mark, finishing at 875 level.  Last time the market had a win streak of 4 up days was when Santa was motoring out of town for a New Year’s party that led to 944SPX.   That pretty well puts in perspective what a dreaded January it’s been for the markets as this current move needs another 50% (70 pts.) or so just to reach this year’s high!.  On the other hand, we’ve had a pretty good month here at DJIM while the market had negative returns,  we’ve been pretty selective and most recent ideas tacked on nice gains today,  just overnight,  FSLR added on 6-7 pts to highs, SPWR was up 7% at highs, NTRS play has gone from $54-55 to 61,  joining JPM GS as the financial plays here and CHK could have been caught for 5-6% in a few intraday hours.    When there’s a broad rally,  everything practically moves.   The reason we’re pointing these plays out is despite the markets celebratory mood,  it was time to cash in some chips.    Considering the market has been whipsawing most indices ETF traders to bits lately,  it’s prudent to take some profits at this point and wait for the next buzz word to materialize…a headline buzz while the markets pullbacks a tad in overextended names and consolidates some.   (A negative headline that could slow down things is the Republicans stance today on the stimulus).    At least, that is the hope for the rest of week..consolidation!    Afterwards,  we can pick up where we left off in picking up back the names that have worked this month, albeit the Financial Generals or EPS sector/ plays.    Nevertheless,  it was essential to break 850 to have any short term possibilities of going higher and we should just be happy about that.    The mood has changed, even though today’s rally was due to talk (CNBC) of “Bad Bank” in the near future,  it has put to rest “Nationalization” talk it seems.    The original problem in Europe after their latest plan was that it didn’t do enough in taking away the toxic assets and bank stocks reacted poorly initially.    We noted this back than in a Journal.   The tone is different here and the markets are believing these toxics will go away and are showing they want this clear slate of sorts.

The steel sector joined in the fun despite EPS, $ targets being lowered, but as we said what will you do for me next week.   The FED light today,  for whatever reason strengthened the $USD immediately and commodities may feel a pinch tomorrow.  Steels names due to 2 day gains may feel more pressure than others.   Already, Shippers will definitely face stress with DRYS covenants issues released AMC.   

So heading into tomorrows trade besides all the above,   we’ll keep monitoring (pray;) for a good EPS story,  we are also looking at energy names (nat gas inventory at 1030, est -180), the OIH/$OSX are leading on the heels of not the price of crude , but refining (refiners) margins.   Even if the financials slow,  maybe the energy names can pick up the slack and hold the 50 day moving avg of ~867SPX.

DJIM #5 2009

It seems every push for the market upwards is a hard grind, while every push is just a slippery and easy fall.   The latest bringing the SPX to 820 levels down from 870’s taking only 2 days and a few hours.   As of close, we are 8.6% down on SPX for 2009!.    A few factors attributed to the decline,  starting with the Washington partisan battle lines surrounding the stimulus, which we noted,  as a possible slowdown in the works.   Second, the ‘FED light’ was a dimmer as in deflation risks and a half ass commitment to purchasing of treasury (long term).  One look at the charts below and you can see to the minute where the slide in Commods’ (CRX) went hand in hand with a higher UUP(USD$) and the broad market declines for the rest of the week (at the FOMC decision/ statement). 

Next we got a GDP when digested showed a surprise in the build of inventories highlighting FED`s deflation concerns and finally the `bad bank` optimism was abated by the same culprits (CNBC) that reported we`d have a solution in the upcoming week.  Throw in more realization this earning period that earning power is taking a beating in the U.S and you have a market flirting with Inauguration day lows.  Since the media emphasis is on Obama`s first 100 days, we worry about what the next 80+ days will do to the market!.   At the end of 100 days,  it just might be too late..actually,  it maybe too late if something is not put down and liked by the market this week ahead as we can only bounce off 800 so many times before exhaustion takes over amongst traders.  One negative headline at this crucial point and down we go.  The only thing we can say heading into the trading week is stay put, as on the sidelines, and just follow the Washington headlines to go long or short.   As technical as this trading may seem, it is really Poli-trading with Washington the focus!.

..Better than feared..

A better than feared mentality is quietly emerging as January readings are improving in many parts of the globe.  Unfortunately, we can't really do anything about it until Washington makes some positive noise.   Oh well, life goes on and one highlight emerged at DJIM premarket, MYGN.

MYGN,   something must be in the genes for this biotech to produce another strong Q!  Once again, we alerted this shadow-listed stock highlighting that even if it gapped it had room to roam and did ever.  After being 74-75 at premkt alert it gapped to $77--78 and by noon it was eyeing $85.   No matter your entry in the morning,  MYGN should have been a good friend to DJIM members once again.  EPS of .43 beat the street consensus .32 handily, excellent sequential revenue growth as well.   Estimates will be raised here and targets should follow.  On a day where no leadership emerged in a rally, MYGN clearly stood out.   We will continue to trade MYGN,  but after such a robust day, we'll wait for a pullback to trade it again, just like last Q.

Speaking of no leadership in a rally of 140 points!.  No financials, no familiar high beta tech.  We received a few emails, read some trading blogs and heard the same question of where were the financials-banks, most notably.  This led many to question and ask how did indexes move so much.   It`s quite simple,  if you just look at the recent declines of the SP Finacials-Banks, down 27% and  38% respectively and you understand they don`t always follow or lead.    It`s not a question of is this rally day sustainable because all are clearly waiting for Washington,  we realize breaking 850 is most likely not doable without a positive Washington spin.   Today, PNC,  brought the regional banks and the sec down, we also had questions arising about BAC`s credit levels and dilutive equity sales to the gov`t.  This space is clearly underperforming all year and so did today!.   Today's move was ETF and Options driven,  not by any one stock!.   Throw in some broad short covering and nothing stands out.   This is why this move was a head scratcher to many when you look at stocks individually and see miniscule gains. 

A few market bullet points,

Washington, it’s a sector in itself now.  Geithner interview, words of a very aggressive, quick stance on  fiscal stimulus and Republicans alternative plan that would include a corporate tax cut helped the market.  Neither is very meaningful and enough to move the market like it did.   We just think a push higher to protect 8000 was starting when we tossed out the SPY chart yesterday.

Shippers,  we noted this sec late last week, we gained more interest today off the Baltic Dry Index advancing another 4.5% to over 1,100.  Iron ore-China noise flow the reason. 

USD$ was selling off across the board.  Big pullback.  We recently put up charts of UUP-$CRX correlation.  At this point bumps in the dollar and you begin to look to trade some commodity stocks-sectors.   Many steel stocks acted right.   Industrial related stocks performed well off some of the sec earnings..UPS one of them.

Resistance=  around 850SPX

Eco data, including yesterdays note on the PMI, better than feared data flowed some more (pending home sales beat, but with price falls)

CSCO  tonight, market never seems to do well (afternoon of) as a precursor to a big tech report last few Q`s.

...catalysts coming your way..

Early morning was a continuation of yesterdays pain as we hit our very short term support in the ~825 area,  but than we reversed nicely and it was joy all over again in WallStreetville.   As we discussed recently,  this market is making meat out of the ETF SPY , SPX cash traders as they bounce off the walls in a confined rubber room.    At least, the room is padded and small (800-850SPX) and you really can’t hurt yourself in such tight quarters, but what it is doing,  is driving many up the wall as they complain about not making money in this rocky environment.    We have a remedy here at DJIM and that is simply be selective/ timely in individual equities/ sectors and that will be your medicine.    All you have to do is search back and go over the stocks we ‘ve played in ‘09 and you’ll clearly see if you’re picky and timely, you can be having a very good 5 weeks or so.   Lastly for all those out there feeling like they are in a grinder,  today’s upside move maybe an indication that this rocky road may turn out to be a thing of the past as catalysts are on their way.    If you think it’s the jobs report tomorrow were talking about, you’re mistaken.   Unless, it’s an incredibly worse than anticipated or surprisingly good,  it shouldn't matter much as there is much more on the horizon!.    Right now, the focus is entirely on early next week and the reason for the reversal today to knock your head at 850 a few times again (financials leading..GS, MS, NTRS show the buy dip scenario into good news we just discussed again yesterday).   Next week can be described as a do or die for the market!.    A treasury plan will be unveiled for banks and a fiscal stimulus for the economy, most likely.    We also have a TALF for the consumer coming this month.   The HUGE question is if these ‘catalysts’ will be sufficient enough and make investors happy.   If it does, a move over 850 will see covering and buy stops kick in and not just in the wimpy manner we’ve been seeing lately on any rally that eventually peters out a few hours or a day(s) later.    This will be a significant move as finally investors have some clarity and grow to feel this market may be rehabilitated eventually.   The biggest drag remains (confidence) and these catalysts can cure it all and bring investors back into equities finally.    Here’s the scary part, if the above outcome is not achieved, say hello or is goodbye to 800 and new lows all around,  but let’s not dwell on that.

In review…As far as those stocks traded long here in 2009, names we’ve concentrated on, all had a pretty good day.    It seems Oil related trade components have been a non issue of late, yet in the energy space we have CHK, HK  breaking recent highs.    In the financial- bad bank, we have some 'good bank' in playing reversals in GS, JPM, NTRS, PCBT  (defensive).   Recently, we’ve been timely on the shippers and favor GNK  as holding a DRYS overnight is not an option here.    Part of leaning to the GNK is it’s ability to move faster than the rest, but remember that works both ways.    In Solar, we favor FSLR  and it hit a new recent high $150 today as it heads into earnings in a few weeks.    Remember, we went Solar recently because of European guidance in the sector and it's connection to FSLR (Phoenix solar).   We have the Education services stocks, ESI, APOL  flirting with highs after being brought into the loop here a few weeks back.     We have MYGN, once again as an earning play, biotech pill.    Yesterday, prior to earnings coming out we, yes..we who never hold into earnings in the glory earnings days leaned the other way and thought there was a good chance V  and a beneficiary (MA ) to good report might be defensive enough to put out better numbers and roar.    This reasoning goes back to MYGN, ESI, APOL being defensive and producing quality reports and big moves afterwards, even some squeezes after reporting.   Today, we had an intruder and unfamiliar name around here pop up, we'd preferred GEOY  didn’t pop nearly 2 bucks to its day high after alert,  but we’ll take it and think this stock will make some headlines as soon as it clears some more regulatory hurdles in the future and comes on more screens.   This one will take some time, but it could be one like EBS from recent past we said could be tucked away for sunnier days, but with some more risk.     We’re liking commods’ more these days, but aren’t sold on the steels, coals just yet for more than a day here or there.   Still, with any rally in the space,  you have a bunch of names that go as part of a group move off our shadow-list.   Right now, the Ag-chem's are moving in anticipation of a very important week ahead,  which includes critical USDA data,  so we’ve got our trading eye on the MON, CMP & POT  like Michael Phelps.

So the point is simple, no matter how rocky the market seems,  there are opportunities day after day and you just have stay patient and selective till a true course appears.

Holding pattern..

Sitting on the dock of the bay…wasting time was the theme to today’s trade.    Tomorrow, if you’re not careful it’s gonna be more than ships rolling away, it will be your ‘chips’.     Any positives from todays trade like staying around 870 will be irrelevant tomorrow,  so there’s no reason to dwell on today’s holding pattern.      Still as far as today,  we had the Ag’s chem stocks POT, MON MOS  start to rollover ahead of tomorrows USDA # following the run into it.     The coals seem to have short covering occurring, WLT ANR JRCC BTU.    The recent run on the commods’ is not only the BDI,  but the PMI index we highlighted as a positive early last week.     The financials, specifically the life insurers (HIG ) led on reports the TARP will opened up to them.     Recent plays here like GNK MYGN GEOY  all hit new recent highs during the day.  In the broad market, we need a healthy close above 869(50Ma)-870,  today did nothing.    It’s was all a waiting game with light volume for tomorrow and we leaned to the short side SPY, long SDS  for the broad market in case the mood turns negative (premkt) before the announcements.   Just in case the market decides it didn’t get any positive clues today.   It may be disappointed by the time it wakes up and/or trades in Europe is our thinking, we didn't exactly hear anything great ourselves.    Afterwards, we expect nothing  less than a volatile trading session.   The possibility that nothing will change and everything remains the same is high.   The hoopla is Super Bowl out of hand,  the expectations seem to be too high and usually the game disappoints.     Unfortunately, nobody really knows what they want or what is the right solution.     Geithner will make his big bank bailout speech tomorrow @ 11amET .   He’ll have all day to 'sell the plan ' with numerous interviews.    Hopefully, Geithner gives a better presentation than Paulson did not so long ago.   Unfortunately, there is no magic pill and we fear if not enough is done on the toxic assets, we’ll have an unhappy market.    A bad bank with private investors providing much of the capital is not a cure, but maybe an expanded TALF plays a role here as well.    As it stands now,  we’re not sure which part of the rumoured plan can change the sentiment to a positive bias.   If the plan is just an overview and lacking major details, clarity, we won’t have a happy market.  

SELL, SELL, is something Geithner will have to do,  if not,  the market will SELL SELL for him.   We’ll update during the day as events unfold.