DJIM #40 2009
Monday, October 5, 2009 at 07:36AM A clear sentiment change by the close of Friday’s trade and it's timing really stems from our premarket alert on Tuesday warning…“ISM# tomorrow, today is the Chi-town # … as a possible prelude. If this falls <50, watch out as it's unfathomable to many of us in the 'recovery' camp. Very recent headwinds in US eco' data make this noteworthy to watch today”.
As the market fell 5% from those Tuesdays’ morning highs, it is clear the sentiment changed, the Bears got some ammunition as the ‘recovery camp’ and it’s long run got dampened due to the accumulation of negative eco’ data over the past 1-2 weeks. As we said late last week, eco’ data can get bumpy from month to month now and Sept. numbers might just be ‘NOISE’. To get a clear sign we now await EARNINGS to see if this trend can be changed back to a ‘recovery’ theme.
A 5% fall in 3-4 days can wipe out many of your recent gains, it’s a pretty clear known in trading that when the broad market falls 5% as it did this time, many of the individual stocks, especially high beta winners will drop twice or three times as much as investors run to take profits in this class first. Prior to the dime action that saw the market window dressed to 1070, we said, “Understand though, we're not talking a bounce of 70-80pts here like last time!!. Use reversal if it comes to lighten up existing positions and/ or just get your daytrader face on for the time being“. This premise remains till next week, we may get a bounce as alluded to Friday from the gap, but if for some reason you’re overexposed, oversized or just didn’t get out during last week's bounce, use the next bounce to cut down. Bounce may occur for technical reasons and the fact it’s a pretty mute week for eco’ data.
Even though AA (7th) kicks off the earnings season this week, the official season kicks off Oct 14th with the Financials and INTC. Simply, we are in a neutral bias..this means a “WAIT and SEE mode”. Considering over 90% of the stocks on our list are below 9EMA, we don’t find this engaging to do anything other than catch a individual bouncer for a flip trade. Other trade possibilities this week is to look again for a USD trade, any weakness is a commodity- linked stock trade possibility.
