..dime action?

What all traders know from early September is this market can stop and start on a dime. 

Beginning of September this Bull run was seemingly losing steam (losing 3.5% from H to L).  In the middle of this dip, we talked about Bulls not coming in/ providing underlying bid until things settled down, especially after a 2.2% drop in one day.   Also, at this point we talked about the Bears missing an opportunity to press the Bulls to their knees.   Seemingly, we could be in the same pattern.  It’s seems too predictable now,  but the shorts have this as on upside risk always shadowing them.  The ability of the market to stop and start up again is there once again.   Right here and now is probably a great opportunity for such to occur soon.   Why?.  This dip has given an opportunity for money managers to dress up their books as we’re coming into Q end and they might be foaming at the mouth.  The start of Window dressing may just bounce this market very soon. 

Still,  this action is reminiscent of the action prior to AA  earnings last Q.   If this is the case 1035  is a possibility (because we closed below 1055 today) before AA’s earnings in 2 weeks,  but it doesn’t curtail a reversal possibility before.  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.

Takeaways from todays’ action

IJC# was positive but was nullified by a negative housing number.  Strong USD pressuring commods’ and not helping bounce opp’ for risk assets such as equities.

Volume was heavy, but it was confined to the SPY and sector ETF’s, even in the continued sell off to 1045 there was minimal damage to the majority of individual stocks as many < 1-2% down on our list. Might be a positive.  Individual stocks taking a licking are more of the momo type (casinos) and/or garbage stocks with bigger profits to take off the table.

IPO’s,  we ignore the REIT IPO's, we all know this is crowded/ garbage space.  Instead, we look to one we highlighted AONE  and the spectacular day it had.  The offering and size was raised (positive) a few times and it still managed to get a herd into all day pushing it higher.  This is a positive for the market's mentality going forward.  Still, all the new issuance's and follow on issues hitting the market puts the market in a posssible digestive mood again, keeping 1100 out of reach for the time being.

RIMM,  judging by ES action tonight the market may shrug this report off and may signal a bounce begins from 1048.

A Giant(s) beat...

Today's the day where you can almost skip the entire regular trading session and go straight to after hour action.   Why?   We hope we don't have to answer that question.    Basically, the day's action is very meaningless despite some not so good earning reaction to JNJ and downgrade of a few financial companies by Mrs. Whitney.    In fact,  SPX lost only three points and the other two indices are unchanged.   

What happened in after hour and what happens pre- mkt tomorrow (JPM ) is probably going to set the tone for rest of this week and beyond….“the official season kicks off Oct 14th with the Financials  and INTC“.   Everything before this was pre-game stuff.. AA etc,   now the real game starts.  As of tonight, the Bulls have led of the game with a lead-off “Homer”.    JPM  will make it back to back dingers, very likely.

INTC, one of the most influential technology company, reported earnings AMC that beat the most optimistic expectation.   In addition, INTC also guided next quarter much higher and with significant higher margin than the consensus.    In all, it's a very good if not a great report from this technology giant.

So, the question is, is this good enough for our market?    As far as Intel and the feeling about tech world, we think it's good enough, especially because of the implications for so many of the tech companies reporting later.  However, we still have many reports from many sectors to consider in the coming weeks.    In fact, we have JPM on deck in the morning to give us a first look in the banking world for the current quarter.    What we think that is NOT going to happen though, is that the market will get sold off like it did after INTC's last report.    Also, now we know who has set the bar now for earning reports as far as big company's are concerned. 

At DJIM land, we highlighted 2 previous DJIM eps listed winners, ININ  and BWY  in our journal last night as both companies came out with guidance.     While BWY did not breakout in a big way (still positive close),  ININ did what we asked for.  Still, the trading ranges for both provided some great entries even for intraday trades.  BWY ($1.70 range low to high/ ININ (3.50 range).   As traders, we just have to focus on the winner of the two going forward.    Based on the volume and reaction of ININ today,  we are expecting follow through in the coming days/weeks.    We are just hoping more institutions take a look at this little company start piling into it.    Also,  TRIT,  this is the one with the kind of trading momentum we look for and love.  AONE, another IPO here had good action late afternoon as well.

Bottom line,  it's going to be a busy week and earnings season.  

..Tales(s) of the tape

It’s what’s inside that counts, the saying goes!.  You can apply this to the market today.  On the surface the market grazed (off only 3.5 SPX pts) above the 1060-58 gap of October 8th,  yet the underlying market was terrible with widespread deterioration.

Weekend`s edition, we said stick to ‘bigger names’ ..small caps lagging action.  Yesterday…avoid (high beta cheap-outperformers) micro-mid-small caps.  Unfortunately, what we want to avoid is mostly what our DJIM trading list is comprised of.   Today, the selling continued and got aggressive with many of the EPS out performers being rocked…ININ, HMIN, FUQI, TXIC, TRIT, BIDU, WYNN, STEC, AONE  etc.  Some were new earning report related, others sector realted (China), some IPOs.   In the broad market, the TRAN breakdown has the SOX as a partner.    Also, even though we've avoided commodity linked stocks recently, we can't help but notice the damage done in sub groups like steel today.   This type of selling is reminiscent of the days when HF`s dumped at the end of a month(s) in 07-08. As we said yesterday, they are locking in profits as fiscal year end for many is Oct-Nov.   While the selling seems to have abated on the surface, buyers are hesitant to step up until the market finds its support level.  You should as well, if your time horizon for a trade is more than a day.   If you can flip intraday, some names will provide a trade, possibly even tomorrow after their beatings.   A stock like WYNN  that is $20 off highs and has ability to squeeze at anytime is starting to look attractive even as a longer term hold possibility, other smaller beat up names don't have the same characteristics yet.

Also from yesterday…"…be careful jumping into excellent reports with both feet immediately.  Wait for reaction to confirm buyers will still eat up growth stocks".     Today, we alerted a stock with a cautionary…'see if it catches on'.    What we see clearly now from this stock and others is even small caps are going to have a hard time catching a bid from an EPS report in this current environment.  The 'sell on the news' is spreading and we again caution about getting in on a stock early from an EPS report at this point.

SPX has been down 6 of last 8 days and 3 in a row and 1060-58 might be ST support, but the market awaits GDP (Thur) and homebuyers tax credit news/ financial bill etc.   So, while the market box score may look okay on the surface tonight,  there are ominous signals internally that require the above trading basics to stick to.