Sign of stabilization?
Friday, June 19, 2009 at 06:11AM It's way too premature to talk about the resumption of rally at this point. Let’s not get too excited because today was the biggest one day gain covering a span of 10 trading days!. Wow, that’s frightening (biggest gain) considering all we did was tack on a whopping 8 SPX points, despite favourable Eco data points. The gap breakout 920-923 proved to be the ‘ new’ formidable wall today. In all honesty, it was quite disappointing because we had reason for a nice bounce (oversold high beta sectors +positive eco’) and only managed another tepid reversal. We’re confined to the idea of trading between 903S-920R-929R for next little while as noted in previous Journal.
The volume across the board was very light all day with the exception of a few commodity names. Most of the action today was in the ‘safe’ groups. A major hold up to any push higher had to be the Techs not participating. Reasons range from concerns of China slowing 3G and rate orders from chip companies slowing. Recall, we noted SOX was down 3 straight days /avg. 1.5% and this pace continued today after a bounce yesterday.
After a few days of hard sell off, we expected commodity + banks - brokers (“still on sale group“..under 9ema) to lead a reversal if it came in the morning. The steel sector is the one we’ve concentrated on lately and it showed some life. We are referring to some of the usual names here such as X, CLF, RS, SCHN etc. Still, the best group, in our opinion were the Financials as buyers came out their caves. Even though the group does not have the kind of trading lust from couple of months ago, it does help to stabilize this market. Seeing strength in the financials, usually signals a stop to a correction.
As far as DJIM is concerned, we are still in a process of finding new support, so we are still sticking to relatively safe plays as we've talked about last few days. RIMM's earning is not causing too much of an impact from the look of its AH action, even though it‘s a sold Q backed with good guidance. Tomorrow's witchy Friday expiry day, too much noise (expectation of volatility) accompanies this event as usual. We find it to be the most uneventful trading spectacle imaginable. If the short term low was seen yesterday, then we have to be optimistic about this market because there's not a lot of damage done in this correction. We've always highlighted a 5-6% SPX drop off highs as a correction end posibility since March and it's worked. We've had 3 of those so far and hope this is the 4th such correction. A question circling our heads is if the window dressing was done early for this Q to (956), if not, we could see some more action to close the month. It's an interesting question mark to ponder, right now. It would seem wise for money managers to take advantage of this quick slide and do some more book juggling before months end, wouldn't it?
Chart below outlining 903S-920R-929R, large view in Chart section.
