DJIM #18 2009

Just as many begin calling a top…“a reversal bar, no follow through’’ after Thursday’s trading day,  unexpectedly a forgotten player arrives spoiling their exuberance.    We're alluding to the $CRX , MS commodity index breakout,  we noted early Friday morning.   This move should continue into Mondays trade and might leave a few to radio in Mayday on the May Day Holiday! (UK closed Mon.)    The stress tests anticipation is an overhang that leaves the financials in a holding pattern the past few days, but imagine if this CRX move wasn’t just because a ‘holiday trading day’ (most of Europe and a lot of Asia off),  and the commods’ can really breakout with earnings plays by their side!.   Maybe this was a prelude to the weekends, Kentucky Derby where a longshot of earning and commods`lift takes this rally a few furlongs longer!.    Add some possible stress relief (financials) next week and we have a possible trifecta winning ticket to SPX 1000,  a V shaped recovery in a wire to wire finish.   Put your blinkers on shorties.   As we said heading into Fridays trading,  don’t fret the day before action as long as ‘The Premise’ is not showing signs of deterioration…keep trading with a long bias.   As far as we're concerned there is no reason the SPX can’t at least be higher than where it was end of 2008 (900) in the short term.  Things are a hundred times better than they were at that stage globally, so why should we be lower.

The main positives behind the commodity action on Friday was the China PMI  (2nd straight reading suggests expansion), US ISM  and of course because many a pit trader were away or left early Friday.   Still,  if a breakout holds, days..weeks later nobody will say a word about the fact it was a light trading day.   A breakout is a breakout in most TA circles.    Energy led on crude and a rip in a sub commod' group (coals) was due to news of consolidation of a private coal co’,  it fetched half of what it was worth last year,  but a deal is a deal.  This sparked the closely related MEE PCX WLT ANR JRCC.   Also, DRYS.  posted probably better than feared numbers and even though it lost momo`by close,  it was still a quick 4% to highs from early morning post on forum.   Again, GNK  remains our fave in this sub commodity group.   While cost pressures, pricing- demand is anaemic,  the macroeconomic picture is turning to the expectation of a second half recovery.   Simply,  the end of recession view story is being expressed by the market.   Once expansion is signalled outside of China PMI,  a recovery trade will have far to go.   In great part this is because this has really been mostly a short covering rally  with lots of $$$ that will participate after the recovery is signalled to the general investing public.    This is why another say 25% is very possible with a nicely timed correction trade in 2009.    All the horses are seemingly stepping up to the gate for what will eventually be back to the 'Easy'  trade days.

Another possible trade emerged for the week ahead, the 'hedge fund' trade as BX FIG  began to move into earnings for the upcoming week.   This is related to banks- brokers strong numbers in this groups business and is probably mostly fuelled by short covering.   This is only a side show possibility as we have earnings, commods play leading the way.