Churning higher..
Tuesday, June 30, 2009 at 01:21AM Despite the broad market volume being quite light, some DJIM shadowed equities had some pretty good interest. Maybe, some players who'd normally take this week off are staying an extra day or two this week to window dress their books with last Q’s winners. The SP has its best Q performance going back 10 years and the performance anxiety of money managers has shown it’s colors with the June correction providing a timely entry for them just before 1H end for mark ups.
We have accepted the fact recently that we may be in this range for a while before the next earning season starts. A big move is not in the cards just yet, conviction is needed and earnings should be the spark in this low volatility summer market. We feel strongly that the coming earning season will give plenty of conviction for market participant to decide where to take this trading range.
Until such time, note today’s closing above 20ma today on the SPX gives a possibility of trading briefly into mid 930's. Holiday trading and Q end mark- ups can only go so far at this point, we've moved ~40 SPX points already without a true catalyst. (recall we traded above the 20MA all the way during March rally to mid June correction )
Breaking out of recent high or breakdown from the recent low are equally probable right now, but we remain optimistic about the overall picture. Of course, more data is needed from both the eco’ and corporate front. We have NFP this week to give us more light on the current pace of unemployment. Two weeks into July, we’re starting an earning season which in our opinion will be watched much closer than past summers. This time, there's literally so much at stake here. What happens next couple of months will probably determine how most market participants view the rest of the year.
Today's broad based gains, once again gives credence to the window dressing theme as its pretty balanced through sectors and following the SPX tape. Nasdaq lagged due to it's biotech weight.
Many of our favourite plays can use a slight pullback to give us better entry points. We’ll be a little patient on picking stuff to play ahead of the US NFP jobs report and the China PMI this week for a possible commodity linked trade. (Shang index action suggests a good data)