It's been quite some time since poor economic data played a role on this market. Most of it is widely known and/or expected. We have to admit, much of the focus in the past couple of weeks has been purely on the financial sector and crude oil. Even the earning reports, by and large, have been muted somewhat by our standards. So today, we get the data showing an increase in jobless claims number, an unnerving 2nd Q GDP and a late Greenspan blur spooking enough people to cause a 200 point slide. By now, most of us have gotten so used to the up 200+ and down 200+ days that today's action doesn't surprise or cause a scare. In fact, this year is shaping up to be the year with the most triple digit trading days according to our memory, and yet we still have five more months to go.
Tomorrow is the key employment number that many traders may be basing their trading action on for the next month or so. With the majority of the big reports out of the way, the sentiment is definitely being shifted back onto the economic aspect. In our opinion, a lot of the bad earning reports will be reflected in trading action in the month of August. If we do get a poor job report tomorrow, it's almost sure that we will revist the July low sooner than later.
Commodity plays gave back some of their gains today due to the obvious market pressure and recent upside. It'll be interesting to see if they get any sort of support next couple of days providing crude price stabilizes. For DJIM traders, we feel we aren't in a favorable situation to build any positions at this time. What we will do however, is to use any support/rebound action off the fast movers to make a few points here and there. Following some of our favorite commodity plays does have an advantage here. You can be almost sure that on a good day, many of our plays are capable of $3+ gain and they can be very forgiving. The only thing we have to make sure is that we play these on a "good day", where the odds of making those points are substantially higher, not trying to find a bottom on a bad day. Unfortunately, this is the only viable trading method for us at the moment until a clear trend is established among a sector or a group of stocks. Trading a good theme is our favorite strategy, but the current environment simply lacks any theme. Otherwise, we can only try to catch a quick move like in CEDC the past few days for some points and/or an EQIX as last week. Simply, stick to the stocks you know/ traded or look for a set up elsewhere for a quick trade. Take what you can get in these turbulent days.
In AH today, IPHS released what looks to be quite the positive report, ($2.74 vs. consensus of .88). The main reason is the Mexican profits quadrupled accounting for about $ 1.70 of the difference from the consensus estimates. A lower tax rate assisted the earnings of about .30c.. More importantly, the price realization outlook from price increases is positive. Consensus estimates will likely at least double from the $4+ now as it stands. Well, judging by its after hour action, we wouldn't want to guess how this goes as the gains can be deceiving, the volume was low. If we had a large position going in, we could have pushed it higher easily AH's by buying small lots to create a mirage of sorts to sell into later. Maybe someone else did. Given the strength in Agri. stock lately, this is in line with what could have been expected, you just don't know if it will react like IPHS did or like CF did the first day trading following a rosy report. That's the tricky part in holding overnight into earnings, even if expectations are high given the rest of the groups reports, you just don't know what the initial reaction will be. Yes, this IPHS will be back on many traders' radar again. What we do want to caution is that given its multi- week decline since early June, there will be lots of resistance on its way up and many cashing in on the AH's prices in the morning. We'd sell in AH's/ pre-mkt and let the exuberance settle to possibly re-enter if we had this stock. Instead of buying a gap like IPHS in the morning, we'd possibly look to get a piece of MEE off it's report, the number is excellent, but some may be deceived by the litigation number thrown in and so it may become a bargain. Of course, the strength/ weakness of the broad commodity market and /or general market off the employment will play a larger part if we move into anything new before the weekend. ... Have a good one'!