Even before the market started trading today, we all knew that this was going to be a good day. We just didn't know it could be that good!. Not only did INTC provide us with some assurance that things aren't that "bad", we also got a couple of reports from JPM and WFC that were well received in the pre-market. Economic data today was also inline and some big news from Potash all set the stage for a very positive open. Bidding up some technology stocks was easy after Intel's earning, but never in our imagination that the rally today was so broad based. There's literally hardly any stocks that finished negative on the day and many stocks finished 4%+ with some notable gainers from techs and agri/chem sector. Our DJIM list lit up like a Christmas tree and it's only spring.
Oil gained again today and gold finished quite a bit higher. U.S. dollar hit a new low and every commodity play got a bid today. Yet, equity index held steady and finished near the high of the day as it grinded higher and higher. Today's is one of the most steady up days we can recall in the last few months. So what is wrong with this picture? Nothing! This is the exact theme we have been playing for months at DJIM. As we pointed out for weeks, commodity market is basically in a bull market and any strength in equity market will bid up every commodity related plays as well when the time comes.
Here's the dilemma! We think if it wasn't for the commodity market, which is becoming a bigger chunk of the equity market these days, our overall market might have been at a much lower level now. Yes, we think that commodity market is the very reason the entire market did not crash lower the last few months. It is strange but think about it. Do we get up early every day the last few months knowing the credit crisis is bad and economy heading towards the recession and sulk? No! Because we've had plays such as POT, CMP, X, FDG, DRYS..... to look forward to. Money has to flow somewhere to get some respectable return and it sure isn't going into treasury as you'd expect.
Here are some sector run downs...
Techs, with INTC's not so bad number and IBM's pretty good number out of the way, we'd expect this sector to heat up again. No it doesn't mean that we'd challenge new highs soon but it just means that sentiment will be changed somewhat. These days, an inline report will get you a nice price boost given that the "normal" expectation is for you to guide down. We like beta plays such as RIMM, AAPL, BIDU because they really play into the psychology of "tech is still worth trading up". Of course, GOOG's report Thursday is also significant and we feel that the combination of a low expectation from Google and the uncertainty of its report can potentially give traders another positive surprise. Again, we don't play into the earnings, but if the report is half decent, we think GOOG can get back to $500 easy.
Coal, some of the names in the group will release earning soon and we'd continue to keep a close eye on this group. We feel this group is getting the kind of action that's similar to the agri/chem group couple of months ago. If this group has some positive things to say in their up coming reports, we'd be very aggressive in chasing some names up. As far as trading wise, this group has been a champ last couple of weeks.
Agri/Chem, the biggest question right now on most people's mind has to be "is there an end to all this madness"? Stock action wise, we are not sure at this point if the run-up will end any time soon. News wise, we think this group will only get more and more good news down the road. Basically, this group has the kind of pricing power any other industry would kill for.
Solars, maybe once FSLR hit $300, we'd finally get some rest. lol We think the key in this group is not about their earning power, it's more to do with the oil price these days. Basically, with the way crude moves, this group has nothing to lose. We'd buy on any small dips at this point. We like SOL the most at this point and we'd play very aggressive on dips with it. SPWR earnings Thursday will be closely watched by solar junkies.
Shippers, recently we alerted to these guys saying sooner than later they will ride the wave of coal and steels and that idea is paying off big time. We also don't think the move is over as all the commodity stocks are hitting new highs left and right. We've added back EXM to our shipper list today.
Steels, just buy the group! lol Ok, NUE is set to release report tomorrow and we'd see how others react to it. This is actually the group which we have the lightest exposure now, but we are waiting for opportunities to get back in. Congrats to X hitting the $150+ mark, yep it was around $110-115 when we alerted first. SCHN, MTL,STLD wow as well!
Oh yeah and MELI busted the move didn't it!. Yesterday was our exit day pre Ebay report, it's been a good ride since being alerted and now we back up momentarily.
Bottom line, things are getting apparent that not every company is being affected by credit crisis and a slowing economy. We should not treat every company as if it's the next GE or BSC and be rational about the whole situation. In addition, we are still enjoying this ever lasting commodity bull market.