Can't fight the trend...

What started as a shaky day for bulls ended up a shaky day for bears.    You can literally visit many a bear oriented trading blogs and the consensus is that they are nervous as hell.     The initial claim report, though we shouldn't put a huge emphasis on it, was still bad enough to cause some early jitters in the market.     Today's action is a very good example of how to judge where the market trend is going and how to use your DJIM watchlist as a guide.  This is why we were issuing alerts very early as we were seeing things develop off our list, not the indices, and gave ideas as how to proceed.   Market basically shook off early weakness and steadily gained ground and held firm to the end.      In our opinion, it's not the fact that this market wants to ignore any bad economic report,  it's the fact that we got a bigger and more important job report tomorrow to give us a better picture of the employment picture.    Mid day all of the plays on the DJIM watchlist were 'greeners', the breadth was so positive that we'd actually question whether we were up only 20 points end of day.   Unless the number Friday is absolutely horrible and surprising any selling on day 3 after a big rally would only be corrective as sellers have not taken control as before.    Indecision to sell is a smell good thing as the usual selling after big rallies has not occurred.   That is the difference now proceeding the jobs report from what we saw in the March 3%+ rallies.

Plays wise, we have some groups continuing their recent strength while others just started to pick up some momentum.     Everything from Agri/chem, Steels, high beta Technology to Shippers, Solars and even oil stuff all showed various strength and our favorites in each led the way.   Keep in mind, we have alot of plays on our watchlist, well 30+ not including the ETF's for directional purposes is not that much, so seeing them all having a good day while the index is barely up is just simply very encouraging.    

We were quite busy in the morning and the afternoon adding various positions given their respective strength.  Sometimes selling parts as well as a few alerts like DRYS rocked nicely soon afterwards and taking profits cannot be ignored. 

The bottom line, we have a job report tomorrow which may be deemed as a very important barometer of our economy.   In either case of the outcome of the report, we'd likely be adding more stuff to our positions.     If the report is inline or good, then it's a no brainer and we'd be very aggressive in the early going.     If the report is not as good as expected, we'd add slowly into the potential weakness.   In our opinion, earning period is officially kicked off in DJIM land and given the technical trend we are in, the momentum is definitely to the upside at this point.  

Primary Watchlist

Snapshot of platforms primary trade list at close Friday.

AAPL          153.29      +1.68             +1.11              30,527,900  
AEM           70.44       +2.42             +3.56              2,151,700   
AKS           61.11       +0.91             +1.51              2,762,400   
BIDU          293.60      +6.96             +2.43              7,999,900   
BZP           19.02       -1.46             -7.13              1,626,600   
CF            123.21      +8.66             +7.56              3,985,300   
CLB           129.00      +1.85             +1.45              202,200     
CLF           137.33      +4.59             +3.46              1,529,600   
CLHB          63.31       +1.31             +2.11              330,400     
CMP           68.00       +3.95             +6.17              1,402,000   
CSX           56.90       -1.76             -3.00              5,374,600   
DRYS          66.25       +2.15             +3.35              3,494,500   
EOG           124.32      +2.88             +2.37              1,928,000   
FDG           57.70       +1.70             +3.04              2,796,400   
FLS           110.79      +1.37             +1.25              1,075,900   
FSLR          278.70      +27.10            +10.77             12,014,000  
FMCN           40.31     +1.56                                      3, 496,100

GLD           90.27       +0.85             +0.95              7,228,200   
GS            176.00      -0.53             -0.30              8,500,200   
GU            15.45       +0.46             +3.07              1,879,900   
ISRG          336.40      -0.59             -0.17              828,400     
IWM           71.43       +0.28             +0.39              61,536,000  
JLL           82.92       -1.54             -1.82              424,800     
JRCC          19.57       +0.34             +1.77              1,222,600   
JST           33.00       +3.00             +10.00             311,500     
LNN           110.64      +0.93             +0.84              534,500     
MA            228.05      -3.20             -1.38              1,952,500   
MELI          42.75       +3.11             +7.85              2,068,700   
MON           119.01      +1.22             +1.04              7,330,400   
MOS           115.70      +11.18            +10.70             14,330,800  
MTL           133.43      +3.42             +2.63              900,300     
POT           171.12      +3.45             +2.06              9,341,800   
RIG           144.15      +3.77             +2.69              7,897,100   
RIMM          120.12      -2.46             -2.01              24,431,500  
SPWR          90.40       +8.39             +10.23             6,129,800   
SPY           137.04      0.00              +0.00              204,473,000 
STLD          35.95       +1.65             +4.81              5,689,300   
SWC           17.12       +0.81             +4.95              2,360,500   
TBSI          33.35       +0.07             +0.21              429,400     
V             64.12       -1.38             -2.11              9,099,000   
WLT           69.66       +0.58             +0.84              3,094,800   
X             140.62      +2.71             +1.96              5,645,600   

DJIM #14 2008

As the jobless rate spiked down to 2003 levels, it is almost impossible to argue a recession is in place, but it is also impossible to say that the Bear haven't lost it's grip on the markets as we saw the Bulls pulling the indices up and shrugging off the jobless number.   As we discussed all last week, the ability of the market to hold onto its gain after the 3%+ rally was signalling the selling had cooled down and this time it would be different than what followed the March rallies of the same proportions.   If this is indecision on the sellers than its good sign as they are not sure of things as before, the only argument they may use now is calling the low volume suspicious and that they are just waiting to rattle the rally.   Either way, it's not your problem or ours as our goal is to capitalize when the chance arises and last week we think did just here as DJIM's players, our index you may say outperformed anything in sight.  We had some nice alert leads ahead of the curve on CMP, DRYS, MELI and it's nice to see them getting some headlines right after.     When you're ahead of the curve, you get a chance to sell to the herd!.  That's the game!.  CMP was noted on CNBC as a stealth play behind POT, MOS, we profiled it in December, and it spiked in premkt and was a feature story on IBD this weekend. DRYS was referenced on the front page of Barrons this weekend to a good story inside.    Heading into the week, it's quite simple as there is no reason to change what's working and that's everything off our primary watchlist relating to...." Agri/chem, Steels, high beta Technology to Shippers, Solars and even oil stuff".   What will most likely come to hand this week is an important technical picture to track.  This is where volume comes into play that wasn't there last week, if it comes to the upside it will drive the market through resistance 12800.  If we see the 12800 coming with dry volume, we will most likely take positions down and wait for a clearer picture to emerge.   Right now, the Transports are leading the way and that is a very important positive signal for what possibly lies ahead for the rest of the indices, including the general economy.   Little economic data flow this week should allow an opportunity to potentially trigger some of the resistances and that is what we'd closely track this week. 

We've tweaked the DJIM primary tradelist, shadow list.  We've taken down a few financials as we don't need to monitor, trade 4-5 now and a few others that are just boring now like SAM, HURC.    Still the latter are EPS wins and if we get that trade again as we're starting to see, we'd keep them close to our primary list.  We've added the GU, JST as more on the speculative side, reason speculative you may say is because we'd rather lay our bigger dollars on the expensive stuff that's been working as that is where the volume allowing for easy exit is and where the sideline money from institutions is flowing to.   In the good ole'days when EPS and sector plays from midcaps rolled these would be on top of our list probably.   Times have changed and we need to see the momo game come back to go heavy at this point in these types.   Remember, if the mkt reverses in anything that resembles the past, these lower volume, cheaper plays will slide harder and have bigger spreads going down as buyers will dry up.    Simply, don't become complacent now just because the market is good and you think you're indestructible.   Others are included following mentions in alerts, Journal the past two weeks....MELI, RIG, CSX, SCHN.    WLT is another name we're adding.

No biggie...

As brief as it was, market today did break through 12700 Dow and 1380 SPX.    We know from a while ago how powerful and how meaningful  these resistance levels are to traders and their psychology.     The fact traders were not seeing a significant follow through after we broke through caused a wave of profit taking.    In the big picture, this is ok and it's not a big deal that we didn't close near the high today.   In our opinion, there will be more attempts to break those levels in the coming days and one of those attempts will break it cleanly with a rush of buying.      Also, the first half hour of trading action from the resource based plays was just too crazy and difficult to hold onto thanks to a flurry of upgrades.  The gaps were gifts to take down positions.     

Lets take a look at a few sectors here...

Coals,  we have FDG, JRCC, a rejuvenated MEE, and WLT now as our main coal plays and all of them exhibited a similar trading pattern today.   They all broke to new high earlier before retreating later in the day.    The catalyst for profit taking was ACI's mid day guidance call and we think this one is nothing more than an excuse for profit taking.    In fact, we'd be ready the next day or two to pick up some shares back if opportunity comes.    Again, we like this sector very much as pricing power and demand is extremely favourable for the group.

Steels, even though most of them did not close anywhere near the high, the common theme is that most of them notched a new high intraday.   X, STLD,AKS, CLF (coal as well),  all hit new highs.   This is one powerful group and expectation is very high from the group.    We are still trading them aggressively but we reduced our position sizes quite a bit.    Basically, trading X at $140+ just isn't nearly as comfortable to us as trading it at around 115 when first introduced on DJIM.    There hasn't been any pullback for 6 or 7 trading days and from our past experience, we have to be cautious at this point.

Agri/Chem, this group also is trading near the high on the back of MON and MOS earning.   POT earning is toward the end of the month and we think there's still room left to trade.   We'd go aggressive on dips and light when chasing strength.  This has worked very well recently and we'd go back to this strategy.

Shippers, even though earnings is still quite some times away but we feel with the recent activity in resource sector, this group is getting more attractive by the day.    We still like DRYS (thanks Barrons for 4 point gap) the most with TBSI closely behind.    In this sector, it is not necessary to play all of the names, you just have to stick with the best one.  Also, as the steels, coals get upgraded, we think it is a matter of time before they start doing the same to the shippers.

Solars, today's the first day where the group is showing some weakness.   We'd be patient and will be looking to add little bits at a time over the next couple of days.   We are eyeing 9 ema as a possible point to rebound.  

Time after time, as much as we like to move away from the resource plays and into some more technology oriented and other eps related plays to take full advantage of this rally, we still can't help but notice that we end up going back into the resource plays as our biggest trades.     Seeing is believing, whatever gets the most attention these days also gets our biggest attention.    At the beginning of the year, we had a feeling that this might be the year of commodity for DJIM.   So far, it is turning exactly into that.

Give us a move....

Both the bulls and bears are desperately seeking a move from this market.     Yesterday it looked like bears gained an upper hand through out most of the day but today's action is the complete opposite.    The only similarity between today and yesterday's action is that both days closed well below their intraday peak level respectively.     In either case, we are here to set up for something big down the road.    In terms of the bull/bear case, you can argue for hours straight without coming up with an agreement.     To us, seeing is believing.   Lets' see what GE does and even if its not been the essential measuring stick for the market in years, a disappointing report at this point will be ammunition for the Bears and will be blown out of proportions in our view.   How and if the market bounces from such an event will very telling of where we may be going. Instead of predicting to what may happen, we simply follow the action very closely and react to any sentiment change as we see it.     Basically, you can be a bear and buy up this market or you can be a bull and sell this market.   What we are trying to say is that no matter how you present the case, it's always the action that dictates one's final stand.     As traders, we are in a business of analyzing what people(majority) do, and not what they say.

Most of the sectors acted well on our screen with a couple of plays particularly standing out.    MELI is one of the plays that stands out.    We are simply amazed by not only its resilience to selling pressure last few days but also the strength and the volume kick very late it exhibited today.    This one is definitely high on the momentum end.    The speculative ones like JST and GU also behaved well last couple of days.    JST looks like it wants to challenge recent high soon and GU feels like it's one good day away from starting another leg up.     On the other end of the spectrum, we had MTL giving back to back big days, while others like MOS, POT, AKS, EOG... just inched higher.    Oh yeah, most stocks don't pulls those 10 or 15% move on a day very oftn, so for a $100+ stock, a couple dollar move is the norm and they add up over the time.     Basically, when you look at the close of some of the plays on a weekly basis, you'd know where the direction/trend these plays are pointing.    We try not to day trade plays like MOS, X.. but we'd rather add on slow days and sell on strong days.    In that case, we don't always get the best price on either selling or buying but we make sure we always have full interest in those plays and not to be out of them.

Next week is the real kick off of the earning season and if the reports aren't as bad as people fear, watch out above.    The reason why we are saying this is that the interest rate environment currently just does not favour idling cash or money market accounts.     We believe the lack of interest bearing instrument is forcing lots of accounts to get back into the equity market on any excuse.

Smell the roses...

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.

DJIM primary shadowlist

Our platform list at close Friday,

Symbol  News  Last Price  Chg (Prev Close)  %Chg (Prev Close)  Volume   Low  
     
AAPL          181.08      +1.08             +0.60              35,931,400   178.55  
AKS           65.72       +2.79             +4.43              2,719,400    62.73   
AXYS          56.20       +0.96             +1.75              203,200      55.49   
BDX           88.27       -0.97             -1.09              977,300      87.94   
BIDU          362.00      -8.00             -2.16              4,117,500    357.60  
BZP           21.65       +1.89             +9.56              1,300,700    19.78   
CF            135.12      +3.08             +2.33              1,860,300    131.18  
CLF           159.96      +5.15             +3.33              2,142,700    153.85    
CMP           66.40       +2.80             +4.40              738,100      63.86   
CTRP          67.87       +2.82             +4.34              1,426,000    66.03   
DRYS          90.75       +7.54             +9.06              5,310,500    84.50   
EDU           75.73       -0.31             -0.41              318,900      75.13   
EOG           127.22      +0.37             +0.29              2,975,400    123.92  
EXM           43.23       +3.17             +7.91              1,450,900    40.50   
FDG           63.50       +2.73             +4.49              1,318,600    60.78   
FLS           123.57      +1.49             +1.22              677,000      121.77  
FSLR          277.50      +14.15            +5.37              4,754,900    266.70  
**FXI           164.00      +1.84             +1.13              4,882,600    162.45  
GS            200.27      +1.22             +0.61              9,437,500    198.00  
HES           106.34      +3.88             +3.79              3,905,800    103.51  
IPI           44.75       -0.33             -0.73              2,972,900    43.68   
**IWM           72.69       -0.06             -0.08              58,836,700   72.24   
JRCC          24.16       +2.48             +11.44             1,095,200    21.67   
JST           38.91       +1.09             +2.88              83,200       38.00   
**KOL           45.23       +2.11             +4.89              197,500      43.01      
LNN           100.65      -3.09             -2.98              468,700      99.81   
LUFK          74.99       +0.65             +0.87              144,600      74.81   
MA            285.50      -8.44             -2.87              4,470,400    281.85  
MEE           52.81       +1.77             +3.47              1,769,300    51.32   
MELI          50.25       0.00              +0.00              554,100      49.80   
MER           52.72       +0.33             +0.63              20,350,600   52.08   
MON           114.51      +0.85             +0.75              7,392,500    111.72  
MOS           124.90      +2.35             +1.92              6,247,600    120.15     
MTL           145.36      +7.51             +5.45              1,172,300    137.44  
NS            53.45       +0.43             +0.81              138,300      53.16   
PCLN          126.37      -1.86             -1.45              1,621,600    122.87  
PCX           68.02       +2.76             +4.23              275,100      64.49   
POT           186.94      +3.78             +2.06              12,151,800   184.64  
RIG           151.71      +5.95             +4.08              5,817,400    146.50  
RIMM          132.52      +4.52             +3.53              18,962,400   129.48  
SCHN          87.79       +1.39             +1.61              508,100      86.13   
SOHU          77.89       +2.45             +3.25              3,110,300    75.00   
SOL           16.00       +0.38             +2.43              981,100      15.85   
**SPY           141.65      +0.53             +0.38              181,585,500  140.56  
TBSI          44.25       +1.58             +3.70              697,900      42.29   
V             82.95       -2.45             -2.87              34,162,100   81.00   
WLT           72.95       +5.24             +7.74              4,146,500    66.13   
X             157.06      +5.40             +3.56              4,373,600    151.24  

** denotes ETF

Solid..

Anyway, you look at it....The trading day was solid and it doesn't include a disclaimer as in little volume!.  We've been alluding to the fact volume is and will deteriorate heading into the summer and so we can't put much emphasis into the volume day to day now.    In other words, a +130, +42, +15 is a nice rally, nothing less!.   Last week as the indices declined, we headlined, "Not worried" and heading into this weeks trading..."In other words, we're not really worried about the markets performance/ declines last week, we think this is all the normal course after a significant breakout".    Today's performance did nothing to squelch that belief with the IWM/RUT back at resistance with the potential to create a significant breakout.  The SPX back at the psychological mark of 1400+ is where we want to be while the NDX leads the market.  At these closing levels on the IWM NDX is where you want to see volume kick up to create a talked about breakout.     If we don't get the volume breakout the Bears will do their best to diminish the move.   Considering the way we've been grinding up, we just may continue to do so even on a breakout.  lol.  A slow burial for the Bears is just fine.  Maybe a few put a gun to their heads already as FDX, MBIA stories rebounded.

Nothing extraordinary to add today as all the recent alerted new plays continued to make new highs.  We are speaking of the SOHU ANR, SNHY, MVL, and even the BZP which we nudged a few times last week.    In the meantime if this isn't enough points pocketed, we have other tradeable opportunities stepping up as in RIMM and ENER.    As we said yesterday RIMM is long term again in our view.    It wasn't just the intro of the Bold device, it's the RIMM plan at analysts day that sparked a lot of interest.      If you were around AH's, you may have caught FLR with us for what is already a nice trade.   Management raised guidance to 6.25-6.55 from 5.10-5.50 on strength from all segments.  You don't have be a genius to understand this headline.     One sector though was priming up (Shipping plays) as shipping rate noise and as to why they are this high hit a few publications like FT.    Wow, what a shocker, we've only been writing about this scenario since DRYS was in the high 50's in March-April. 

Oh yeah, doesn't it feel like the sleeping giants are about to roar once again! .  Maybe its just withdrawal we are feeling from the Chemicals-Ag, steels, but with $CRX keeping its head up...who knows, we could be playing hard again very soon.

The premise behind DJIM has always been based on earnings and even in what is the worst of eco times supposedly, we are full of plays riding this methodology.