Did we get over the hump today?. Besides "curbing the enthusiasm", we still wanted, what every wannabe bullish trader wanted and that was to see a follow- through day to Tuesday's rally Considering this rally lasted longer (morning to close) yesterday, we wanted to see institutions, MF’s step up to the plate today and carry this market further. Equities opened strong suggesting some Instit’/MF’s don't want to be left behind. You can only miss so many 5% gains in the books you show to clients every Q, so we had hoped they’d chase, adding fuel to a rally. This soon slowed and an overall boring choppy day ensued with the SPX closing in a tinge of green with no evidence of late day "whale" buying. This hopeful whale of a day had no hump!.
We noted early this week that we had liked the less talk days from D.C, letting the market deal on it’s own to find a bottom. Today, it changed as O&G’ made an P.R. appearance and the market coincidentally or not (yeah, right) started to drip down from highs of day. What still may encourage some is we didn’t give up the gains as a rule to recent past short covering rallies. Honestly, that's little consolation prize to us right now!. SPX 740+ is needed to get traders thinking this move may have legs, until, we’d remain cautious and even leaning to short some ETF’s (SPY eg) for the cautious or some Banks-Brokers intraday for the more risky until/if we see this latest squeeze continue past 740. We always talk about conviction buying, a break of 740 would bring out memories of Tuesday’s rush to buy/ cover if it comes "soon". As far as tomorrow, the dull close with no whale buying seen should bring a lower open, it also seems implausible for banks-brokers to outperform for a 4th straight day and lead the market higher by close unless the M2M surprises. SPX needs to stay above 715 for any positive bias to remain throughout the day.
Once again, 3rd straight day, we had banks- brokers outperform and Tech was not far behind. The longer we can’t take out 740, the better the chance of some negative newsflow to come from the financials, especially overseas making for a quick end to this move. Pessimism will return, outweighing the positive newsflow from WFC,C etc on this side of the pond.
At least, we had some play on a shadow listed alerted stock, AXYS at $33 that gave a ride to a high $39. The rumor was confirmed AMC by AXYS and we think this is a nice hold if you got in 35-36 or lower. The reason is this stock had fallen to very cheap levels as CEO noted in release and this has draw suitors to inquire and it has only about 11mln outstanding shares which a huge Defense integrator like L-3, Raytheon etc might find cheap even at $50+ X OS. Basically, its undervalued even at yesterdays close. Of course, AXYS can pull itself off the market and the stock would fall, but that may only occur when prices are substantially higher and it wouldn’t matter cause we all should take profits along the way. Still, if doesn’t get eaten, it has many pending contracts in the works that are not included in growth projections.
AMC, we had STLD lower numbers, we are even more negative on this steel drum band of STLD, AKS, NUE, X than after X’s earnings (Jan 28/29th Jrnl), just before the recent market collapse started . X has dropped from $36 following EPS to a low of 16+ and we think it will revisit those levels. This sec’ may shadow the Shippers to some degree with debt issues. That's the short end of it as long as the market doesn't show more upside.