Better to wait than act..

Index wise, there was less drama today than yesterday.   We are guessing that the market is still trying to recover from last Friday's mind boggling point decline.   This is where we got to pick our spots carefully.   The action overseas, first of all, was just downright ugly.    Normally, we'd say that it should not have a huge impact to us here, but we still have to be mindful to avoid some of the plays that get affected.    The plays we'd avoid right now include SOHU, BIDU and any other Asian companies that are on our shadowlist.    It's really not that these companies are bad, it's just the fact that we are concerned that the overseas action can and will eventually spill over to any and all of those companies that do business there.  Just putting it out there.   Basically, we'd rather be safe than sorry.

Commodities, this is the area where it gets interesting.    Yes, we noted that the CRX may get beaten up today,  some sectors like Steel and Ships just got hammered.     On the other hand, coals and agri/chem seemed to be holding well along with a couple of oil plays.    We are trying to be selective these days while not rushing into buying things eagerly even on dips.    As we pointed out yesterday, while some stocks will appear to be bottoming on an intraday action from time to time, we'd prefer to wait for confirmation before acting with purchases.     Trying to catch the absolute bottom, regardless the quality of the stock, can be risky at times.    So instead, we try to catch the relative bottom after we see signs of a turn.

Out of many plays on our shadowlist, we are going to highlight a couple of plays out. RIMM as popular as this one sounds, it feels like this one is putting a turn in place.   Of course, this isn't a commodity play so you probably won't get daily gains like as in a coal play.    However, by pointing out a probable outcome, even a few points in the current market condition from a tech stock is not a bad thing.    We do like the liquidity factor of RIMM though.    IPHS, perhaps it's catching some fever from MOS run-up but we feel it may be more than that.    There's simply still not enough coverage from this stock and not many traders know about it yet.   Based on the trading last few days, we still think it's in the accumulation phase, despite the fact it's at the 52 week high.   We like this one.    Coal plays, ANR  PCX  MEE  JRCC are the top dogs in that area and this is probably still the strongest commodity group as of this moment with Agi-Chem coming in hard from the back.    If you recall one of our journals a few weeks ago,  we felt coal is the commodity sector with the safest upside and even more recently said the Agi- Chem may be the next group to go.    The coal group is exhibiting pausing action with analysts taking turns upgrading the sector.    At this point, we don't know how much further upside it has left but we always believe market will over exaggerate even the wildest expectation.    The two sectors that are seeing serious trouble are solars and ships.    With Solars, technicals just look terrible and many stocks broke down from the recent support and we aren't even going to bother waiting for a turn until some sector specific news that can boost up the action.    With Shippers, we aren't going to ask questions at this point and will just leave them be.    

Bottom line, everything we said happened, the $CRX fell 30 pts high to low, the market(DJIA) had a fade opportunity as it climbed 170pts intraday...You could have saved money, you could have made money.  We did neither really due to little exposure and because we want confirmation here and there.   This is the time we have to focus on the obvious, and more so than in the past.   Market is going through a lot of turmoil right now and the only visibility we have with us is with the commodity plays.   

Change of pace needed...

What might be the change to get the doldrums of this week out of the way.?    Well, once again, we are nearing the reporting season with some of the major financial companies reporting next week, led by GS and then a tech in RIMM on the 25th to possibly get attention on other matters..."earnings".     Once again today, one of the financial companies was under major scrutiny.     This stuff just doesn't seem to get old and the situation is eerily familiar.  We said LEH needs to throw out the kitchen sink before the week started, today they sort of did by sweeping their CFO elsewhere and throwing out the COO.    The only difference this time, is that people "sort of" know what to expect from this situation.     It really doesn't matter what shape this company is in financially, people expect it to be sold in order to survive.     The way the stock price has been acting as of late, the general feeling is that the company will be sold at a much cheaper price.    Whatever the case, just get it over with!   This is just darn right scary considering LEH was considered a powerhouse among the investment banks to so many.      In as little as 3 months apart, can 2 well known investment bank/brokerage firms cease to exist?    Whatever the outcome is, this is shaping up to be one of the most horrifying years for the financial industry that won't be forgotten easily.

We also had to deal with MSFT dropping the acquisition discussion for YHOO that stirring the market.     This means that internet competition is going to remain fierce with all the major players remaining independent.   We think the eventual victor out of this is still going to be GOOG as evidenced by its stock action.    We're not into recapping news,  but we are just pointing out how much we need a change of pace and hope earnings from a financial such as GS and a tech in RIMM will do such.

In terms of commodity area,  it was a bumpy and lumpy ride throughout the day with the $CRX breaking the 50ema and closing at levels not seen since early May.   Yes, we can blame the dollar noise noted beginning of the week.    Crude reversed the early loss and ended up with a slight gain.    In AH,  STLD raised guidance, so we may be able to see a bounce from the steel sector.    The steel sector can definitely use some positive news as technicals show worrisome signs.    Basically,  it'd be nice to have some news like the Agri/Chem had couple of days ago.  

Coal plays are hanging in and there's news that MEE is being upgraded to S&P 500 index in AH.  We tried to get Briefing to point out the earnings revisions from JPM on coals noted here yesterday,  but they've always been a little hard headed when they miss something important. 

We are eager to see how this week closes off tomorrow and/or just get this week out of the way.   Many Shipping stock holders are definitely for the latter after seeing them fall 25-30% in a week or so.    The numbers are ugly this week, -3.7%, -5.7%, -4.6% for the DJIA, NASD, SPX.   Again, we aren't rushing to chase anything significant at this point, we are simply waiting for things to settle down.

Uglier than Betty...

There's no need to point the finger because it's pretty much one sided action today.    Action seen today is simply a "massacre"!    So yes, it's that ugly!     Unfortunately, there was really no warning to the extent, but the damage in shippers, solars and the other days Steel earnings 'cook in', were probably indicators more than we'd like to admit.   Even the early "Shale" excitement was pushed aside as collateral damage spread out into just about every part of the equity market by the afternoon.   Yes,  the "all mighty exuberance", should have been sold into considering the sickness seen in the market.    Almost nothing can withstand such selling, everything becomes vulnerable, especially any momentum...speculation plays.   Generally, we feel  people were dumping stuff indiscriminately before the long weekend, and perhaps, before the employment report tomorrow.   Some may blame the expected ECB hike or the weakness in coal price as the catalysts for the commodity selloff.    We think, regardless the reason, someone(s) out there were ready to dump lots of commodity related shares onto the market.   Is it profit taking or is it something else?.   We don't know because there's literally a million reason to sell a stock and we're not about investigate.   So in conclusion, commodity plays were taken down hard and if we remember correctly, this is the biggest single day carnage for CRX this year.  It closed at 918, our last note said,.."those dominos we speak of in full effect.", the CRX was around 955.   The " big way...domino effect including commods", noted yesterday came today.!  It was on the mind and unfortunately it happened.   Hopefully, we are all still standing!.    Action like today makes us weary to buy anything.   Traders may have an opportunity to trade Friday, others should just stay out!

As for the rest of the market, the story got uglier and helped push the commodity massacre.     This is the week we are supposed to wave our respective national flags to celebrate.   Instead, people are waving a white flag to this troubling stock market.    It's just very unsettling to see the broad market action,  even if we've stayed out of the trouble the entire year so far.

What is DJIM looking for at this moment?  A relaxing weekend...simply!.   We'll  look for any changes in sentiment toward the commodity sector next week,  Friday will be irrelevant in our minds.     Unfortunately, despite today's massive sell off,  we just can't draw a firm conclusion on the sector.    Until positive sentiment returns, we are calling this a severe correction for the commodity sector.    Sell offs like today take sometime to recover and before we even think about stepping back in, we need to see some stability first.

Tomorrow's employment report may be a catalyst in either direction and we'll watch for development closely as traders only.   We are most likely to stay very quiet the next couple of trading days.