No cigar...
Tuesday, January 13, 2009 at 07:36AM With the way financials-banks got obliterated and energy/ materials related got dumped, there was just no way the market could've held the 50ma of SPX 887 after the open. At this point, we all have to agree that this market is nothing but a challenge to read. There is practically nothing left of the Santa rally. Anytime there appears to be a decent run-up, you'd think that there'd be some support underneath the rally afterwards and we'd be able to trade again from there. Unfortunately, these days, support means nothing. The next major support of SPX 860 is something we'll be watching for, the selling was overdone in a lot of respects on lower volume than last week giving a chance for a bargain hunting bounce sooner or later. In truth, nobody really knows where we can exactly bounce from. This, after all, is still very much a bear market. So, no matter how we approach things, we have to bear in mind that we are trading in a bear market in scope of everything we do.
Other than financials' horrible day, commodity stocks also got slaughtered today. The weakening of crude brought down all of the plays on our watchlist, even with Natgas (1 of 19 in CRB index) being the lone gainer, the E&P's got hit anyway. To top off things off, there was a bearish USDA report for corn futures which basically brought down the strongest group a day or 2 ago (Ag-Chem). Well, there's no strength out there other than APOL which appears to be holding on due to it's business.
Right now, we are staying mostly neutral. We like to see if there's a bounce at SPX 860. This is the week before Obama's inauguration and we are "hoping" market would calm down somewhat heading toward the end of week. Basically, something has to be done to stop the slide in these financial names. Why? The downturn of these financial names is usually associated with credit crunch and that very worry can crumble this market, just like in November. But, the playing field is different so you'd figure they can do something worthwhile, once in awhile, but no cigar! As far as plays go, we are looking for some stabilization in the commodity sector and than nibble some familiar Shale names (Natgas, cold snap coming into weekend) and maybe others on these big pullbacks. We are not trying to be aggressive here and perhaps it's the best strategy when times are uncertain.
Bottom line, small and light trades on stuff we know best is the way to go these days. We are constantly keeping our radar up on earnings mover such as APOL. But honestly, we don't expect many earnings movers this season at all.
AA, came in with expectedly weak earnings AMC, (most base metals already took a dive into report). Overall weakness in commods' will likely still see a follow through early on with the dollar/ crude aiding again.
