Persistent..

We have always asked ourselves question like this "does a quick rebound back to the previous resistance be trustworthy?"  So far in 2009, nothing behaved in a logical and conventional way.  This also includes the technical side of this market.  We spent most of the day hovering around SPX 1098 and it is exactly where we closed at.   After such a quick and powerful rebound, we just had a 2 day pause without giving back any ground from this market is considered a victory to us.  This is evidenced by the sea of green on our watchlist despite a market pause.

If you ask most traders about what they think of current market,  they'd tell you to be cautious and it'd be risky to chase any move at this point.   We can also tell you that secretly everyone wished they'd load up all of the things at five or ten percent below the current level.  Unfortunately, this game is not about "what you should've or could've done!", and it's all about "what are you going to do now"?  We at DJIM are currently holding enough quality plays with a balanced(as we talked about yesterday) mix that if we get a leg up, we would be happy.  If we have a pullback from here, we'd have plenty of cash to add to the dips as we believe buyers are looking for any weakness.  So, really it is about being comfortable with what you holding.   The comfort level is different for everyone, but we'd imagine at some point every one of us will know what level of equity level would make us sleep well at night.  Basically, at this point, we are feeling confident about the remainder of the year.  Many earning reports have exceeded the high expectation and Econ. data has been up to task as well.  So, this market does not need a super drive up toward the end of year.  All we ask is to hold the recent high level and perhaps make a little progress upwards as we move toward new year.

AMC, we had HPQ pre-announced a slightly better guidance and an acquisition of a tech. company 3Com.   Well, any acquisition in these days are viewed as positive and there has been about 10+ in this tech space recently.   There were also two very interesting earning reports from GMCR & CTRP, which will definitely get some action tomorrow.  While CTRP's report is a no brainer given the AH reaction, we feel GMCR's reaction can be a little misleading.  We remember the exact same event took place for GMCR during last quarter's earning reaction AMC, the stock went up the next day.  If PEET' s is weak in sympathy tomorrow, we won't be hesitant to catch it on the bid. *At this point buyers are not only looking to buy the broad market dips, they also look at individual plays that dip by themselves to get exposure.   The market is probably finished with 5% corrections for 2009, so you have to be selective and look for individual buys if no negative catalytic newsflow comes rest of 2009 to get in.  Example is 24hrs ago, MELI  was under $43 in early trading, today you could have unleashed some near $36, if you bought the dip of a good eps play.  In addition,  we'd be looking at UTA  to see if it can catch any CTRP sympathy trade before it reports next week.   

We have to say things are looking pretty good at this moment.  If financial heavy weights such as JPM or GS can lead the sector with a strong move higher, we'd be looking at SPX 1100 in the rear view mirror in no time.  Unfortunately, today they gave up early gains and market followed suit from new SPX highs.

Brake on or just a break?..

While it looked like the market was having a bit of trouble making any kind of rebound through out most of the day, it did manage to climb up and close near the best level of the session at the end of day.    However, there's really nothing to cheer about because we still ended down almost 15 pts on SPX and closed below 1001.   The  Brazil ‘threat’ noted before the trading day pumped the USD at the open (unexpected) as the futures did not point to such and we went through a sinkhole to about 1090 in the first 15 minutes.  Another big catalyst was the BofA downgrade of chips which is really no surprise because their reason was speculated right after INTC’s report. 

Recall, many times, we’ve said when Bulls are hit by a fast and deep sell off, they do not put an underlying bid/ support until things cool and settle down.   A technical breakdown like today is not the same as the previous days shallow dips that are bought up.  Note, there was not a lot of individual stock hits, usually means mostly a ‘futures’ ETF technical fast money trade.  This means holders were not dumping stock.

Yes, we closed below the 1001 level which invites room for potential further downside.   Will today's move signal some more turbulent days ahead?    We'd think unlikely as today's move may have taken most of short term excessive bullishness down to a reasonable level.  Still, we'd preferred to have tested 1085.

After today,  it does feel that we are not obligated to chase some plays at an extremely uncomfortable level anymore.   In a way, it's somewhat of a relief to see this market come down once in a while.    Remember, healthy bulls runs will consist of many up days and a few down days.    Even though the down days may be dramatic in action, it is a natural occurrence as we‘ve all witnessed.    What we have to do now is to take advantage of some of the pullback to add to our existing position or start new positions on those plays we'd feel uncomfortable to play a couple of days ago.

Story is the same and strategy is no different.   There may be some headlines out there blaming this and that for this particular day but end of day it’s really not relevant as market will forget and move on to new headline.    Also, everytime we have a down day, you'd hear more cautious comments from analysts, but they always quickly disappear once the market resumes the uptrend.     Like we said in previous Journals, we strongly feel that investors, and especially institutional investors, are locked in their mind to bring this market to a higher level to finish up their year.    There's really not many potential negative events between now and end of this year that can come in and change the amount of bullishness we have out there.    The once in a while profit taking days are merely acting as a reminder that this is still a risky business.

As far as plays wise, of course, the safest thing to add on a day like today are the mega caps like MSFT and AMZN.   Still, we aren't excluding smaller plays that have taken hits lately like PEET CTRP GMCR (new adds to DJIM, AIXG RINO ) to our dip list either because we know what they are capable of on a good day(s).    Bottom line, tomorrow is the option expiry day for the month and there isn't anything on the Economic calendar.  A close over 1093 escapes a downside reversal week,  break of 1085 and we may eventually be testing the gap of 1070-1072 discussed a while back.  We’d watch 1085 to bring out the underlying bid if it has time to flatline there and not be reached because of a negative catalyst.

Yesterday's alert 'short' on shippers produced some ugliness in the group eg. GNK -11% EGLE -13% EXM -12% DSX -7%,  we would stay clear of being long and/ or anticipating bounce in this group for the short term.

Jitters dissipate..

As the market hovered in and around important support 1088 (20Ma) and 1085 Fridays low our jitters were abating as a downward breakdown was becoming less likely.    Our jitters were not around Dubai as our previous Journal stated, but the back to back to back to back end of month selling we’ve been seeing in the market the last part of the year.   This Nov. month’s end is almost as crucial as last month due to fiscal selling possibilities by HF’s.  Fortunately, they probably don’t have much left to throw away after October as they’ve been sitting on their hands supposedly not participating in new buying and probably because they better hold what they have into year-end or face underperformance anxiety again.  

What we saw today, we haven’t seen in a while and that is Financials  outperforming, especially, it was almost a shock to see GS  and JPM  up, finally!.  This was bullet point #1  as to why we felt this was a good day and we should’ve been up nicely as alerted in afternoon because it showed Dubai fears were diminishing.  The last hour close points to a ’nicely’ open and was not just ‘marking up’ by managers in stocks to close off month according Cramerhead tonight.  This move should extend in morning in our view.

Next, bullet point #2  was not the China overnight gains as US markets rarely follow up or down the last few months (instead Europe), but what they were ‘pledging’ and that was to stick with stimulus efforts into 2010 and so this abates change of policy worries as been the case of worry in world markets, including US.    Part of this was the early morning alert  idea of CAAS , which went from mid 18’s time of alert to $20+ pretty quickly as  ‘passenger vehicle’ tax cut schemes were positive and we thought this was the best play (sub-sector) to jump on. (WATG TXIC may be others if this has life).  A few other DJIM china plays also played along, notably CTRP, TRIT, RINO.   On the speculative side, SEED  on Journal during Thanksgiving week regained momo’ for a big day.

Bullet point #3  was the Semi numbers out over the weekend.  Recall, BOA recently cracked the chip sector with a downgrade well, today JPM boosted '09 sales forecasts following better SIA sales showing sales are tracking or above expectations Q4 with solid demand.   We have AIXG  (ADR), our recent fave here making new closing highs in Germany and in US.  ** Note, there is a CFSB conference this week and companies may provide more positive updates signs for the sector and drive NASD.

In our view,  these bullet points were positives that were overshadowing in the morning any negatives eg. Dubai (positive news in pm) or holiday retail stats (actually improved in afternoon as more data came out /24% to 11% YOY from early am data).    As the news in afternoon on Dubai and Retail improved,  it pushed the market away from the important support levels all the way to 1095 on the back of already positive news flow we’re highlighting. 

It's all good...

So long, Dubai!   Since the Dubai news hit, we suspected that the news just would not be able to bring down this market. ..“we see this weakness as an opportunity.“..“Dubai stuff is really a non story here..”(alert Monday).   Today, all the talk is what we’ve been saying, except many who were drawn into the fear hype are only hearing these words in the media today, sidelined with many missed SPX points and individual stocks making new highs.  Getting in tomorrow for a Dubai trade is a little too late.  The past couple of trading days have been great to our latest bolded stocks as they've been making new highs....AIXG (CREE/VECO  alert Nov 24),  RINO , Nov 20th (new adds to DJIM, AIXG , RINO ) to our dip list either because we know what they are capable of on a good day(s)..MELI, CTRP TRIT CLF…and CAAS  20+% in a few days.  

As we have pointed out over the weekend and yesterday,  Dubai is likely an isolated agenda which is “containable” and regional.    The overwhelming appetite for equity market is the most important theme we have in this market right now.  That’s why the premise of the never-ending underlying bid is and has been the overwhelming theme here for months.  Simply, this has meant buyers are there for support and any sell offs should be used to buy your favorite DJIM stocks if they get hit or not.   

As of the closing tonight, SPX stood at 1108, smacking against the recent high.    We have mentioned couple of days ago that investors have this urge to get returns off their cash.    Well, you aren't going to get any return from money market or treasury bills.   Nor you can get any return from sitting on the sidelines and watch every single one of your favourite stock go up without your involvement.     Even though we aren't the big money managers,  we can understand EXACTLY how they feel if they are underperforming.    By sitting in cash, or being cautious, the money mangers are under performing even the least experienced yahoo traders who flip SEED  as a hobby.   This may sound harsh but the message is clear out there, "You have to be IN this market to get SOME return!"

Now we got our message off our back, we'll talk about some of our plays.    On our second thought, there's really not much to talk about other than the fact most of our plays are cruising.    Sure, some of the plays may act a little overheated, but we still have to be thankful for the kind of  excellent action they've given us.    Some of the Chinese (bullet point#2), more positive data here today and plays continue to be very hot and that's a very positive development going into the year end.   We’re also adding CAGC  to our trading list as Ferts are hitting new highs.

Only disappointment today is the GS/JPM  Financial bullet point from yesterday.  The more we think of it... this sector may lag for rest of year and not stop the market as long as the group just holds flat.   Bullet point #3 from yesterday, SEMI’s  (up 3%)led the move today with more companies (ALTR eg.) providing market boosting updates and  2010 forecasts out this morning.  

However, we also want to mention that it's ok to trim off some of the extended positions here.   We have done so today, but we'll remain on the aggressive end on any more pullbacks.  Due to what we see in the market today, we will look tomorrow at getting possibly back into a casino 'trade' with WYNN, LVS , the two names we play here.  We also see shippers  turning here and into year end as alerted today.    The market may consolidate some tomorrow, but we think it's a stock pickers market going forward and so individual groups will still attract attention, even if the broad market tape is not doing much. 

Before you know it,  this market may leave you behind once again so you have to absolutely have some holdings going into the year end.     We still like the idea of a balanced portfolio although we have been tilting our weighting toward the smaller stuff over the past few days.

Bottom line, we have a job report to look forward to this Friday and based on the market sentiment, the number may not even matter that much.   Folks, we are right against the recent high here and maybe we can just get lucky this time.