Sell in May...or will it be, Buy in May??....

We officially ended the month with SPX closing at 872 after a sprint from the blocks to 888, today.    Who would have thought the SPX would churn in the mid 800 range most of the month of April.   Back in late March, most market pundits expected a pullback from this market and a retest SPX 780 or perhaps even lower.    Looking back, we just have to say "boy, are glad we made our adjustment quick"!    In the entire month of April,  we didn't even come close to approach the SPX 800 level and that alone is quite an achievement!.   So, while most scream tonight, a 'reversal bar...no follow through day..etc', we're really not concerned as we're not the the panicky type.   Reason is methodology,  we adjusted late March to what got us here and not be tied to every move on the SPY/SPX as most of the market had become.  We've been into individual- sub groups plays and now the market has walked into our hands where earnings plays are making this a ' stock pickers ' market!.   Did you notice the majority of those linked stocks did not act with the market turn?.   So, no big deal!.   Plus, the gains early on any stocks previewed gave you an exit with nice profits if that's your trade.

What do we have to look forward to now that we are out of April?   We expect to see exact same sentiment carrying forward with earning plays dominating the trading screen.    Whether you like it or not,  people have come to believe that we are in the early recovery process.

Right now,  we aren't going to debate or argue against the actual facts with regard to economic recovery.    If this is the sentiment shared by the majority of the trading world,  evidenced by the stock behaviour, then that's what we'll have to stick to.    After all,  this game is about pure psychology.    What you believe and what may actually happen are two different things.    As long as people act the way they believe,  that's how this market will play out which underlines our main trading theme.

Speaking of earning plays,  we had two MONSTER plays from GMCR FSLR  highlighted in last nights Journal.   Did they go limp with the market?   Both stocks simply exploded from the get go and they stayed strong till the end.    It feels like it's 2004,  doesn't it?     As we said, most of the stocks on our trading list finished green despite the softness from the financial sector.    What we are extremely excited to see these days,  is that earnings/guidance once again matters in this market.     This is simply the kind of proven play style we were so accustomed to back in the good days.   We are so glad the "good game" is back.    There have been numerous strong earning reaction as of late.   In addition to the obvious ones,  we're monitoring 'new names' ....AAN CTV IRM LIFE STAR EXPE SFLY ARRS TNDM,  some may become fixtures at DJIM heading forward.    Recent plays like NEU PENN  continued to churn higher.    Again,  when it comes to earning plays,  we'd always be aggressive buyers on first pullback....PENN NEU GMCR RGR CTV DDRX,   still, most 'new names' we're undecided on at this stage.

We may not have closed the day at the high,  but this just gives market enough time/ room to churn higher.   In our opinion,  the sooner we get to SPX 900+,  the sooner the party may end.   Therefore, we'd rather see this market take its time and allow us the traders to re-establish positions as we churn up.

Bottom line,  this market is giving everyone enough time to make a play or two.   It's absolutely crucial NOT to waste any opportunities in this trading environment.

Away from the spotlight...

Basically, all of the action today after a triple play rally is not from the usual movers and shakers ,  instead it’s from our boring listed  plays..old (commods’ ) and new (EPS’).  The index may have closed flattish and financials rolled over naer close,  but it's otherwise a pretty swell day around these parts.   The biggest story of the day occurred AMC.   We are referring to the gigantic offering from BAC.     Here's the eye catching number, 1.25 BILLION shares at an average price of $10.77/shr were issued/ sold by BAC.   Over 800 million shares look to have been sold in a large block!!   Wow, this is just something we don't see that often in our lifetime.    Will this massive offering give some more firmer support to the market?    After all, traders were worried that BAC might have trouble raising money,  but it's just not the case.( now ½ done to 33.9 capital plan).    We have to view this as ultra positive    It wasn't a big deal for GS, MS or WFC to raise money,  but a massive secondary raise from BAC(somewhat inferior quality bank), a 10% discount to the daily avg since announced seems to have not been a big deal either.    As much as you'd think this would suck up a lot of cash from the investors, this has to be viewed as very positive development for BAC, the financial industry and this market in general as someone took a huge 2/3 stake of the offering.   

Now..the real action today was from a lot of our recent earning plays and the group plays.    We’ve been highlighting buying pullbacks awhile now as our 'Premise' holds.   Recall, we said many new plays are toying around 9ema, of course this would include most of our plays as we've been in a 5-6% corrective market.  eg. BWY DDRX NEU GYMB  FSLR ICE CTV  LIFE...In addition to the earning plays,  if that's not enough, we also have commods’ feeding off the weak $USD unwind,  GNK JRCC SCHN X  and agri.(POT, MOS ) since we *highlighted crop report last week were gaining more ground today.   

Earlier, we also had EJ , a former gem here, which guided pretty nicely, gained a trade spot quickly on to our playlist.   In fact,  it seems many of the old Chinese plays are heating up here again.    ASIA  SNDA  TSL.. are just some of the plays acting well.   Remember, we have CAF  to basket a further move here.  SOLF  also reported a not so bad quarter and gained some positive reaction today from firms.   This may bode well for solars STP and TSL reports coming up.   Also, NTES SINA SNDA are other China reports shortly.

Also side market note , CY (semi) had the most bullish comments from the often mentioned ‘tech conference’.   Conclusions from conference are more positive than expected and we should see the space continue to get a bid this week.    ADI (semi)had a good report AMC

On the other hand, we also have runaway earning plays like ADY  STEC , which we are patiently waiting for a pullback before making a potential entry.  As we have mentioned before, this market is full of good trading plays and we really appreciate a slow trading day like today.  

Technically, we are currently range bound  (876-929) right now heading into a holiday week.    There's no telling how the rest of the week will play out (FOMC minutes tomorrow), but we do like the action in many of the individual plays on our list going forward.    If this market can nudge higher, our question and answer to “Sell in May or will it be Buy in May?…was correct at SPX 872 as it‘s become a stock picker‘s market ,  dominated by earning plays churning this market higher. 

http://www.djimstocks.com/djim-journal-09/2009/5/1/sell-in-mayor-will-it-be-buy-in-may.html

June starts with a big bang...

This might not be the first day of summer officially, but, we officially kicked off the "slow" summer trading season with a very loud bang.  The positive China PMI  data led to strong overseas trading, the news of GM Chapter 11 (finally closure), and a couple of upgrades in the morning were enough to gap up the market on top of Friday’s strong close.   We noted the importance of China PMI midday Friday and pointed out the impetus in Journal for a move from the month long trading range today… The “holding pattern“, we think is the market waiting for China to make the next move literally. It’s been pretty quiet lately after the initial ‘leg’ up and now we wait for signals for the global , eco’ outlook from China. This will (if positive) include help for the tech outlook and definitely the commodity picture for the 2nd half of the year".    Today, it was the fuel for the impressive global market melt up, no doubt about it!!.   The US ISM number (5th consecutive mthly increase) came out at 10 am and pretty much sealed the deal for the bulls.   The "deal" we are referring to is the official breakout of the recent ‘May’ trading range.

Mid week around SPX 900, “…….we could be getting rotation into consumer driven NAS/tech coinciding with last weeks positive data points in tech conference/eps. So a close over 1430 $NDX can be very bullish and we could be on way to SPX 950, a clear break can be over 915, 920SPX, it may be useless and be a little late to enter after breakout levels we've been talking (930’s May highs)".   What we are pointing here is the $SPX literally made a move under radar in 1-2 hrs of trading of 40-50 pts to a high of ~947 and you’ve missed it,  if you were not positioned in low’s 900’s last week to take advantage of the stealth move.   Considering, we literally hit that ‘on way to 950’,  it's an excuse to take profits off table and re-position.   We’d welcome a pullback to re-initiate many positions, whether it is tech, commods, china linked stocks.

The volume across the tape may not be as super strong as a breakout volume would've warranted, but we’re pretty sure many still can’t believe their eyes and continue to sit on cash.   Money is sipping into the market slowly,  but the world has literally missed the rally.   The statistics don’t lie as many refuse to believe we are in anything but a mild recovery.   The world is underweight, including hedgies, 'whales' and will eventually lead to more upward pressure on equities in the future.

As we have been pointing all along,  a break to the upside has always been the more likely scenario.   Someone has to give up and there was too much "upside risk"  for the shorts/ Bears weighing in on this market.  Technical this time.   Recently, we've had way more positive eco' data points compared to the negative ones.   The earnings have been better than expected and action in the emerging market lately is nothing short of superb.   This is also coupled with the fact financial issues are somewhat behind us.   Everything that has happened lately is viewed as positive development for this market over the long haul.   Therefore, in our opinion, this breakout was inevitable and hopefully our bullish stance at DJIM has payed off for members lately and since March.

So,  what's the trading strategy now?   Although,  we aren't in a mood to chase anything new today, we are mentally prepared to buy stuff back on any worthwhile pullback.   Basically,  the price level that you've seen a few times when SPX was at 875-880 level may not be there in the next little while.    We have to be comfortable with the idea to 'move up' our own buy trading range.    Earnings plays are still the same and those that showed exceptional technical strength are our favourites.  Techs, Commods and China syndrome are back in full force these days.   Besides the obvious long standing commodity/ tech stocks (most on shadowlist link),  we had some recent add-ons such as lodging play HOT  (last alerted low 20's) for a breakout top range move, EJ, china earning play breakout recent tops, CVLT, a tech play is near 2009 high, slow crawler BWY  is back near $15 highs after a pickup here at ~$11.

Oh yeah, were you a good trader and monitor these potential earnings plays we put up early May in a secondary shadowlist?   Some nice pullback buys emerged in what many called a terrible chop trade in May, but as we said it's a stock pickers market going forward and many were making fresh highs today...eg, SFLY, STAR, TNDM, CTV.   Stocks on list like DDRX  NEU PENN GMCR  were already in play at DJIM and are likely on our shadowlist link.   Patience is a virtue and pays off well if you have the right earnings stocks.  It is also quite a safe trade and lurking a good pullback works well.

http://www.djimstocks.com/djim-journal-09/2009/5/6/new-eps-this-q.html

Oh yeah, did anyone catch the AH news that EMC is coming out a competing bid for DDUP?  Remember, we picked up CVLT  last week as a secondary play here.  To be honest with you, we haven't seen this kind of action in the tech land in a long time.

Summer trading, fortunately is also slower paced and has lower than average trading volume.   This is actually better for us to not have to worry about chasing some wild strength.   We don't believe this market is capable of going straight up at this point, so there'd be plenty of opportunity to get in on this leg.   However, when the setups do present themselves, you don't want to be shy away either.   Bottom line, we are feeling very confident and comfortable with what may come the next couple of months.   Summer trading, once again may become fun.

Day 5 ahead?

We mailed in our request Wednesday afternoon for a bank-brokers led reversal and today it was stamped as the group followed through in the morning bringing along the rest of the SP tape.   An impressive ~3% SP Financial rally tacked on to yesterdays 30 minute move accompanied by Crude (yesterdays E&P plays PVA GDP  tagged along) and slowly commodity stocks began to bounce as the USD weakened. (becoming too closely related the USD moves).    Was yesterday’s big sell off just the usual hiccup?   Maybe, but Shippers stayed red into close.    If all this action wasn’t your scene,  the DJIM earnings/ story scene is enough as more Q’s plays,  DDRX  OGXI  EJ  (co’ cnbc guest) all had 10% -20% intraday rips higher.    A few others were on the cusp of/ and breaking monthly/ recent  highs  EBS TSL SAFM ARUN.    The buy pullback theme remains pretty clear on all DJIM plays.   Basically with the majority of these you can use the ‘hit and run’  play by taking profits and switching between names while waiting for a pullback to get back in something you sold.  

Chart: SPY move/ SPX reversal off 200ma

Once again the shorts are thwarted as they can’t get enough downside days to get cocky and initiate new positions to press the market lower, but this has been one of the bullet points we’ve pointing out since SPX ~800, so it’s nothing new!.

Ahead of NFP  #'s tomorrow,  we have a few things roaming in our crystal balls.  As we know the ADP # (532K losses) handicaps the NFP (-520K consensus),  so you’d expect a similar number, right!/?.   Well,  we’re feeling a little squirrelly and think we may get under 500k.    Something also interesting is the Banks-Brokers, we’re seeing and using the XLF  here.   Considering the action in the group in the last few hours, if this is only the beginning of a move,  it would soon be kissing the 200MA.   The last time this occurred was in prehistoric times;)..2007!.    So, is this the missing link to push the tape higher as most indices are over 200ma now?. 

Oh yeah,  we are moving into a possible day 5 with SPX over 200ma.   This is crucial as this confirms for many the breakout,  we‘d actually probably just prefer this occurring to close off the week to avoid excessive bullishness setting in and instead take baby steps.

Chart: DAY 5 SPX?

DDRX - BWY - CVLT- EJ alert plays in May

At DJIMstocks.com,  besides maintaining a ‘bullish’  posture in our Daily Market commentary since late March for the broad market (SPX) detailing reasons for such as we progressed higher."  This is almost a clincher and what will drive this market closer to SPX 1000.…03/24/09”,   We also initiated a trade in commodity linked stocks-groups at the same time,  followed by the probability of the small caps trade off earnings.   Below are a few examples of alerted plays in what was to many a boring ‘chop’ trade in May.

DDRX, alerted April 30 trading in the low $9's. traded to a high of $18.75 in 25 trading days.

BWY, alerted at the open May 5th at ~$11 as an EPS play, traded to a high of $16.75 in less than 25 trading days

CVLT, alerted as a DDUP secondary play May 27th, ~$11-12, traded to just under $16 in 8 trading days.

EJ, alerted at open ~$13.50, traded up to ~$17 in 13 trading days.

Earning coming into focus...

In the premarket newsflow,  OECD  raised the economy outlook for U.S (alert posted).  This is the first time they've done it in 2 years.   This is actually a direct forecast contrast of what World Bank said a couple of days ago, which we stated we had problems with and it would go away once/if digested properly.   Regardless who's right and who's wrong, we always feel that it's up to the market to decide the outcome.   In the econ. data dept.,  we had a unexpected big surprise Durable Goods #  that further excited the market in the early going.   Although the market ended up giving up most of its gains, we'd still like to point out a few positives.

Earnings do matter! Tech giant ORCL came out with better than expected report last night and the stock/ sector was greeted with some positive reaction.   Despite the late day weakness, both ORCL and JBL (another one reported eps last night) held up most of the gains by the close.   The responsible culprit for today's late day weakness is the FOMC statement or better, the lack of it in regards to more purchases which caused a $USD lift off and commods' took it on the chin.    Still,  you can say that everything they decided during the meeting was pretty much expected.   The bottom line is that we are back at SPX 900 w/ 50MA crossing 200MA.   Buyers are present,  just more discriminating with purchase prices than in the previous months of the rally.    As more and more companies line up to release earnings, we are feeling more confident about buying on the dips, (STEC another perfect 9ema move today).   Given the weakness we've endured the last week and half,  some of the plays on our watchlist are no longer in the "overbought" category.

Looking at various sectors on our shadowlist link,  there's no doubt that some of the strong ones came from Steels (most up 5% early) + Tech  area,  as well as some China  plays.  In fact, overall breadth is superb today with only a few red names on our entire watchlist. http://finviz.com/screener.ashx?v=141&t=AAPL,ADY,AKS,ARUN,ASIA,BIDU,BWY,CVLT,DDRX,EBS,EJ,EQIX,FCX,FSLR,GMCR,GNK,GS,GYMB,HES,HOT,ICE,JPM,JOYG,JRCC,LVS,MA,MOS,MYGN,NEU,OIH,PENN,POT,PWRD,RIMM,RVBD,SAFM,SCHN,STAR,STEC,STP,TSL,WFC,WMS,WYNN,WLT,X,&ta=0&p=w&o=-change

Before the actual earnings season starts in full force sometime in July (now we have May ending reports), our trading strategy is simple.  So called "technical weakness" continues to be a buying opportunity to us,  just as we noted this week if we approached 880SPX.    We just don't see a major breakdown to a much lower level without some major negative catalysts coming into EPS.   Given the recent positive earning trend and econ. data points,  the probability of a breakdown is even less likely.   Right now, we are still in a process of working through some overbought levels since March and it's likely to continue over the next couple of weeks.   This shouldn't concern new standout EPS plays coming.  

In the meantime,  enjoy the good trading action that still exists out there,  you just have to be selecive or just tune in to the soap opera as one congressman is smearing Bernanke with a cover up, while another Senator is confessing his adultress- marriage cover up all at the same time.  Oh, what a country!

No news is good news today......

The purpose of our Daily Journal has always been to act as a lead,  we always say trading is about preparation,  which in DJIM land is being ready to take advantage of a probability and/ or possibility,  abeit a rally in the broad market/ individual stock/ sector.   All we/you have to do after is pick out the relevant plays from the 'Shadowlist' as 99% of our trades originate at the list.     Our own practise is to review our own Journals,  so we don`t lose sight of things and our current strategy.  That's how and why,  we've stayed on a 'bullish'  track since late March.    It's easy with all the daily noise on CNBC or the web to lose track of your own beliefs.   

Today’s rally shouldn’t have had you on the sidelines watching the broad move, scratching your head looking for a specific rally reason and/ or some fresh meat to buy.   Simply,  it’s a broad window dressing  day with no newsflow to account for such action….“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?..June 19th.     But, it’s useless to wait for the day or day(s) of window dressing to make a move and make money,  you had to be prepared (positioned) from earlier in the week and in all probability to book some profits today at R gap.   Why?... well, we've moved about 4% from 888 in a few days and it is a technical marketplace)…“If we get closer to SPX 880,  we feel this is the area we have to be more aggressive in buying,  Why?   We haven't started the next round of earnings yet and this upside risk remains for the Bears”.      Well, we got to “lucky 888.8”  and now it gets interesting again with the SPX stopping at 920, which is the June gap R. 
 
This market has become very technical as you know, but the catalysts that drive the market up and down are anything but conventional.   How about no real catalysts?    There's really no sound or logical explanation that explains the move from SPX 940-950's to the recent low of 888 and then back to SPX 920 today.    We can only guess where it'll end up tomorrow!.     So, we can only conclude that all of these moves are likely part of consolidation that may setup for a bigger move down the road.   We just don't know yet when that will be.

Back to the action and what a day we had.   Recall, we said Monday don't give up on 200MA so easily and today we reversed off the new 200MA!   This move pretty much erased all of the market losses from Monday's dreadful sell-off.    We are in fact sitting at the same point as last Friday's close.   All of the SP groups ended up ~1%.   There's really nowhere to hide today if you're a bear, not in a FDX truck (TRANS up big) and not even in the back of a store (even Retail rallied).   Only the Banks- brokers lagged, but after a few days of underperforming the market,  finally picked up some momentum late in the afternoon after lagging all day to help the market close strong.    We feel that financials are the missing piece for the next leg up.    If miraculously the financials start to act half the way they did back in April,  then there's no question we can take out the recent high and march higher.   We all know that big financials will kick start the earning season soon and perhaps some upside surprises can give a boost to the bulls cause.

Other than end of quarter buying (today was T+3 settle day),  we also have Russell rebalance tomorrow.    DDRX ,  a play we mentioned as a possible play on the index reshuffle, possibly even to the 2000,  jumped a couple of points today in anticipation of the move tomorrow.  

After today's mkt move,  we are going to be a bit patient and see how things develop over the next couple of trading days.    Next week is a shortened week and we don't believe a lot is going to happen.     If we do see some weakness on our favourite plays, we won't be hesitant to buy once again.

DJIM #26

The only trepidation you may have in trading this market is if you’re consumed by technical analysis of the SPX on a daily basis in making trade decisions.   If this continues to be the case,  traders will continue to miss opportunities heading into this earnings season.    Fortunately,  since late March on TSY news from the FED,  we said we’re going back the DJIM basics and going back to individual stocks/ sector picking concentration.  Back to our roots, yep.. back to the days of the Swamp with Lizard King and eventually as moderators for the trading forum in Rev Sharks (www.sharkinvesting.com).    Up to that FED intervention almost everyone was consumed by and fixated on the daily activity of the SPX, including us,  as long opp's were few and far between.    Many traders have stuck to this SPX trade and have missed a beautiful run in individual stocks/ sectors.   The reason we bring this up now is it has become tiresome hearing this is a boring market with little chance to make money due to the trading range last 2 mths.     Besides putting on the commodity linked stocks trade,  we thought if the market continued to act right,  enthusiasm would come back to micro /small caps, focusing on earnings.   Well,   it definitely did as the BWY  DDRX  ARUN  GMCR  ADY  EJ  CVLT  ICE  STEC  EBS  etc. dominated our DJIM platforms with big gains during the recent Q, while supposedly the market produced nothing but a chop trade.    What we’re saying is the market may become more boring in the next 2 months for many traders ,  but we’re looking forward and excited for new opportunities as companies begin to announce earnings for their June ending Q’s.    If things were better for the names listed above last Q,  we expect a slew of new stocks to come on radar with better bottom lines from a recovering economy.  

Until July 13th or so,  you should be drying up some powder in readiness for new stock buying.  You don’t want to be holding stocks that are losing steam or holding any losers if it takes up buying power.  You want to have cash on hand for fresh meat and /or continue for now to be very selective in buying. Your trading proficiency is not measured by how much trading you do,  but by your profits!.   We don't expect any fireworks until next holiday weekend,  we probably did not trade more than 3 or 4 stocks last week with PWRD, DDRX  heading into the week.    It made for a long week,  but at the end of the week it is only your P&L that matters.

..and 5,000 households say...

You can literally take our note following May’s CCI #,  just turn it upside down to discuss today’s market place.  Have a read through first of what we said back in May.

http://www.djimstocks.com/djim-journal-09/2009/5/27/taken-with-a-grain-of-salt.html

As you recall this green shoot was the mother of all green shoots!.   The surprising May CCI # , a number most traders do not include in their top 10 monthly eco’ data points to monitor.   We did move this data point up the ladder to watch in June,  but we still go by…"taken with a grain of salt”, in respect to its importance,  as it’s all of ‘5000 households’ across U.S.     Despite, what we think of this gauge,  we have to think logically on how the market may initially react and that’s why it only took a minute to alert after its release.   One tier1 broker had the estimate at 57, above the consensus.   This told us a low # would cause the wind to be let out of the May bubble# (common sense) as the mkt will use any excuse to move at this juncture.    We came into the day thinking an interim term top (as in this week) could be mid 930’s,  it probably turned out to be 930 today on this data.    Interestingly,   we said last month..  “Nonetheless, we closed at SPX 910 and we are 19 pts away from the short term top. So get ready to lighten up on some positions, folks”.    Well,  we topped out exactly at that same level today as traders unloaded positions taking SP from 930 to 913 quickly.     Considering our views last month, including lightening up positions,  indicated we didn’t take the number very seriously in May and so why should we change our tune this time around.    This is why alerted later in the day for a possible reversal  ~920+ as we have more important data points to move this market coming up shortly.   A probable good China PMI and we should erase all of todays losses in premkt (more on PMI linked stocks below).  Simply, we dropped ~17 pts from initial alert and climbed out of the gutter for about 7 pts after the last post.    Those trading SPY’s were gifted today with some easy volatility points.   As far as a technical wrap,  we think this it for the recent leg up,  we pointed out ~40 points exceeds probability of any more upside on no new worthy catalysts during the move.    We/You have to admit it would be surprising to get a fabulous data point to close off the week.    Therefore,  we have to think some downside potential from here.     Entering the week,  we noted our strategy is to wait on earnings and get your powder in order.     To be completely honest,  we’d welcome a correction part 2.    What we mean is the June correction is probably still in play and sooner than later, we could be testing the ' Golden cross' and then the 888-880 area.    We would love to have this occur or even breakdown lower before earnings kick off, while we sit on cash.   It would make risk reward better for upcoming EPS reports.   A test wouldn’t take long as in days to achieve,  so it is a possibility we are open to.     Look,  we’ve been saying for years, you make your best money in spurts a few times a year,  you don’t need to be invested 24/7.   Just stay selective now and burn a few points here and there off a play or 2 until earnings.    Enjoy some summer!

A few bullet points..

China PMI is overnight and as we said yesterday it is probably a good number once again.  One thing we did notice is traders were not lining up to buy the commodity linked stocks that go hand in hand with the number at the close.   Looks like market might baking this # in on individual linked stocks as traders were not positioning for a premkt gap to sell into.  We were thinking this play into close, but the mkt decided for us.  This is a change in trader tactics, we'll see if this holds premkt.   Next,  we’ll have to look to ISM after the bell, if this China number doesn't muster a positive response.   If a good number in US, follows a good number in China and we get no real positive action as in breaking 930-935,  it will put all the weight of hope on the Thursday's NFP.   Also, US SAAR auto number out tomorrow to monitor for a reaction trade if all else fails.

Sectors,

Friday afternoon, we alerted we were cashing in on PWRD, DDRX.   This week we were beating our heads for doing so as DDRX climbed 4pts this week, consolation prize is PWRD imploded 5-6 pts as regulation news hit all China gaming stocks come Monday morning..CYOU, NTES SNDA.   End result is it never hurts to book profits.     Everything else, financials, oil linked, tech is basically following the SP daily tape.. Ho-hum.

...hit the road, Jack!

...but, do come back!...

Nowhere does it say the first trading day of 2H is like a change of seasons in the traders almanac.  Today was just more of the same anemic volume grind,  a day which probably sucked a few in the morning expecting something more than just a market that slowly rolled over by it's close.    If you’re following the script here this week,  you knew the day was probably done by 10:30.   Firstly,  we had a good China PMI overnight that erased all the previous days CCI# losses by premkt/ open as proposed yesterday.   A decent ISM # that continues to show a bottom in manufacturing followed and we came up to our interim top levels of 930-935  quite quickly,  a level that resembled the 4,000 mile long Great Wall as the market stretched along it all day and eventually rolled from it.  Interestingly, the market push to 930 was not accompanied by the commodity linked stocks as is the case most often.  What we had was a decoupled trade with the PMI- sectors that progressed into a bigger one as the USD rolled over later in the day.  Our hesitation to enter a trade due to inactivity of the commodity stocks into the previous days close was not in vain.  

The only stock(s) that garnered our attention was STEC  as it lit up our shadow list/ platforms from the bell, the other was the SAFM  for an 8% bounce from alert yesterday.

So,  we didn’t muster enough strength to push through 930-935 today and putting all weight on NFP tomorrow to do so is seemingly a lost cause following ADP release today.   Seemingly,  the only probability is some disappointment,  so you might as well hit the road now to avoid traffic out of the city!.   Whatever you’re doing this holiday weekend, enjoy and play safe!.   Oh yeah, speaking of play safe.   You know our number #1 rule since day 1,  we don’t hold stock into earnings!.    As shown this past earnings season,  you can make plenty of money after the release or pre-announcement of a report even after a gap up ..eg. STEC , DDRX,  ARUN…and so on.    You don’t need to gamble for a gap up by holding.   If the last few days are a prelude of things to come,  you are going to be sitting on a potential firecracker malfunction into the ground !….MYGN, BEAT. ILMN SCHN.   Yes, a couple of these are pre-announcements/ one sector and you can’t do anything if you‘re unlucky to be caught in a pre-announcement,  but, believe us!!…this is a sign of things to come if companies disappoint this Q.   You will see huge 20%+ losers all over the place this upcoming Q.

Pints on us!

The solid earnings calls keep coming and the SPX keeps trotting along.  What else is new?.   To tell you the truth, unbelievably the short term outcome of SPX near 2009 highs is of little consequence to us at this stage.  Yes, that’s all the investing public is talking about as we close at a SPX‘09 high, we admit to hardly even glancing at SPX, SPY trading today.   All we see at DJIM is how well our shadow list is behaving and preparing for opportunities ahead for more Pint sized earnings on top of last Q's winners.   Okay, maybe not looking at SPX had to do in part being occupied with watching our premkt HGSI   forum post call at 3.5mln shares/ $10 that sprouted to 123 mln shares traded and a 25% gain from those levels.   But seriously, what excites us is not if the SPX breaks 956 intraday day high this week, but what possibly lies ahead as far as earnings are concerned.  What these solid earnings in the first week are telling us is we are going to get some nice EPS winners in the next 2 months.   Yes, 2 months because most Pint sized caps report for Q’s after all the Keg size stocks report.   Plus these Pint sized caps will have 1 to 2 months of better economy than the ones reporting end of June Q’s now, so earnings may be right out of the park!.  Also, remember half of these don’t even provide guidance which only makes an excellent past Q of relevance.  We should have much more than the (ININ  HITK ) so far this Q to play.

Back at DJIM farm today,  the  drunken’animals were running freely…just yesterday we said…“Even last week, we had past DJIM shadow-listed Q plays putting in new highs at some point ( STEC STAR  CVLT EJ   )”.   Today, we had a few more DJIM shadowed earning stars light up the sky, ( GMCR  PWRD  DDRX ) for 10-15% and some with new highs.  Nobody on the web can be beat that  "Fab 7”  for a few months now.  Also, if that’s not enough, recall in a Journal and later in Forum(06/24) we suggested a pre earnings move will probably come to Casinos after a member asked if it was a time to buy back than.  Well,  with earnings in a week or so these names eg  LVS, WYNN  are acting like earnings winners the past 4-5 days as prospects improve (may need a rest though).  

Even if the market falls into total darkness from something other than a solar eclipse, we have a ‘Premise’ here that's been working overtime since March and an easy to follow formula to stick to going forward.   Note, the "BAR' has been set high for the Keg sized companies by INTC, GS etc., so the big boys ahead will need to shatter numbers/guidance going forward for a great reaction.   On the other hand, if one of these misses it will lost likely be a very nice short quick intraday trade.  The good thing is our pint sized  earnings focus has "no bar" to play in.   Also, the probability a herd momentum mentality has set in and pints are the best way to cure any performance anxiety over one’s stock portfolio in years past.

Geez, just got all thirsty..luckily it's almost noon in London UK!. 

Cheers'

A Snoozer

Despite some early volatility to the downside, the market was generally a snoozer today.    Perhaps, no news is just good news at this point.   Heading into Friday’s trade, we noted technically, as long as we closed above 1055 it would be a bullish sign heading forward.  Today, we found the ever present underlying bid just above at 1057.

Best Sector, tech looked as if it’s done consolidating after 7 days, so we’d look here tomorrow for possible follow through.  Of possible positive interest for commodity sec is the CIC (china sov' fund) getting in the resource game with a 850mln stake in Noble grp (commodity trader).

As far as individual play goes, other than a couple of plays such as SXCI FIRE OVTI  making a new closing high's today, most plays are in a nice consolidating pattern.   What's most likely is going to happen going forward is that we'd see more HITK, DDRX  type of pre-earning run up.  Simply, we may get better pre-earnings moves than post earnings reports this Q.   We have quite a list of plays on our screen at the moment that will undoubtedly have some kind of pre-earning setup.

Other than a couple of Eco' reports, the most anticipated event will be the FOMC meeting on Wednesday and IPO‘s later in the week (list below on site). We don’t expect any surprises from the Fed. but we will keep a close look on how they interpret the recent economic activity or exit strategy. This will be closely watched as a sure sounding Fed gives market participants confidence.    In the meantime, there's really not much we are expecting from this market other than keeping our eyes on some plays that are poking with recent highs/

Bumpy 'holidays' for bears ahead?

Over the weekend, we couldn't help but notice that the general media is a bit worried about the current state of this market.    There were numerous articles citing that we could be getting a bumpy ride over the next few weeks.    This is due to the fact we had two down days last weeks and that was enough to bring out the skeptics once again.     We don't want to read the media comments after today's action, however.    Frankly, we are just a little tired of the media lately and all the back and forth.  This includes every wishy washy regular guests on CNBC that switch sides on a daily basis.   There are many reasons that caused the market go up/gap in strong fashion, but we think the biggest reason is the reason we've been saying all along.   There's underlying bid from the money managers who like to see this market higher, as oppose to lower into year end.

Headlines are plenty today, the weak USD due to dovish comments, China growth forecast of 10% in 4Q, potential FOMC minutes containing upward eco. growth forecasts and European markets were substantially higher due to German/ Eurozone PMI‘s (we noted Euro data as a potential catalyst this week.)    All of these contributed to a quick rise in equity market today as 1100 and 1005 resistance got pummeled.    Are we surprised?   Nope!   Just like on a down day, people need reasons to explain the market action.   For DJIM, a day like today does not shock us because we're 'Bull' prepared due to expectation of a potential underlying bid as this time around 1085.   If you're not a ' Bull' and preparing for a bid, you miss most gains due to a gap like today if you're not invested.   Still, we do have to point out that not all of the stocks were enjoying the kind of gains the indicies are suggesting as the USD decoupled for many commodity linked stocks.   MELI  and AIXG  ( a DJIM add last week) were outperformers though.  Big caps have obviously benefited from the broad market gain, some of the smaller stuff may still play catch up.

Then there is the coffee frenzy.   PEET  was originally a stock we played due to their announced "acquisition" of DDRX, (a stock we covered since high single digits.)    Remember, a while back we concluded that the price PEET offered to buy DDRX is considered an outright steal.   Today, GMCR , the other favourite EPS/coffee stock here thought the same and outbid PEET.   Naturally this type of an event causes a sell off as a bidding war is a negative for the original bidder.   PEET, raised the offer, but will probably lose DDRX all together was the sentiment.     This superior GMCR offer puts PEET in a very difficult situation.    Despite the fact PEET announced to raise their offer with a mixture of cash/share, it still doesn't come close as good as GMCR's offer of ALL CASH.    As of the closing price today,  PEET's offer is effectively lower than GMCR's offer on DDRX.    Why are these two fighting for DDRX?   We have discussed here many times before, it's all about the growth of k-cup.    In our opinion, the bidding war, if it continues, will be unfavourable to PEET and we decide it's no longer an attractive play based on the current event.    At this point, it's even hard to say if anybody ELSE may come into the picture and give DDRX a fresh bid.     You have to remember, the bidding war between the two may actually draw out other potential interested party.     As it stands, even at $30/shr, it's only $172 million.    The reason we gave this a lengthy paragraph is that we wanted everyone to understand our logic to go long PEETin the first place and why we think PEET is no longer a play going forward.  This is not a 'weakness' , we buy, as it’s news flow related.    Do we still like GMCR?   Yes, of course, especially now that it has a chance to grab DDRX.

One of our readers also mentioned SEED,  a stock that doubled up today off volume that's four times its own float.    As of right now, we don't really know the long term impact of this particular announcement.   Bascially there's no telling of what it means for SEED as far as dollar amount is concerned.    What we do know, however, is that this stock may just be the favourite stock of the day traders and speculators for this holiday week.    It might be worth to trade this thing for as long as the story lasts, but ideally it's best to stick to what you know heading into year end.

This is a shorted trading week and many traders are away on holiday as we all know.    Today's volume is relatively low, but it's still pretty decent given the circumstance.    It might not be realistic to expect this market to break out of recent high cleanly, but we do think there are some trading opportunities worth participating in.