Absorption

Today's tape shouldn't come as a surprise.   Not only did the banks- brokers leaders need to absorb last weeks gains,  they also need to absorb their billions of capital offerings with the market.  

Two of the prominent leaders in this rally were the Techs and Financials.   These comprised 50% of the SPX point advancement.    Last week, we highlighted the lagging tech, today we had the financials naturally pause sucking in the gains & slew of paper.    Naturally,  we pause and succumb to some profit taking as the tape goes with the recent leaders.    No matter, Banks- Brokers still acted resilient considering all they have to deal with.    If 50% of the SPX move is going on hiatus until a positive catalytic event,  we are vulnerable to the beginning of a correction for the market.  

Fortunately, here at DJIM we have focus on EPS stocks &  selective sec's.  Today while the market plays in the red,  we have stocks DJIM linked stocks EBS, (reader forum eps note),  BWY  (buy at BAC/MER today) and the Gaming /Lodging sector plays ( WYNN LVS MGM..) still showing signs of squeezing as more LV and China notes come out over weekend.   This is shown in the "Room for Green..", intraday post.   Some may look to defensive sectors like HCare, biotech etc in event of a correction,  we're fine with concentration on recent earnings which sometimes fall into those sectors anyway.   EBS has always gone against the trend of the market as seen in a yrly chart.   We've talked of eventually the market playing into our hands and the easy trade.  Imagine if today's action in EBS LMIA BWY signals a possible return one day to micro- small caps as we get to an economic trough with attention swinging back to..dare we say it back to IBD type of stocks, where growth matters.   Hey, why wouldn't hedgies exploit this area once again to pamper their books?

Besides FSYS  comeback to our lists,  we have added PEGA  LMIA  to our potential tradeable EPS list.  Like last weeks EPS list,  we watch to see if these make the grade,  most from last week are flirting with 9ema.

As far as tech, we have upcoming analyst meetings, tier1 conferences to watch in the short term for direction.

We held 909, at close, which represents a recent trendline, (898 a recent low-the psychological 900 )is where we want see the underlying bid prevail.

Flawless Victory

Perhaps traders, at least the ones from NYC, are in such a happy mood that the Yanks won the World Series for 27th time,  that they couldn't help but celebrate more by bidding up stocks.   More likely, it was Phillies running out the door short covering before the NFP# upside risk.    No matter how you look at today's action,  it was nearly flawless.    We started strong and kept at it and closed at the high.    All of the groups are showing some healthy gains and even the financials picked up (+2%) the pace in the afternoon to make a possible close at a crucial point in our view ~1067/ ~1063ES. 

As forecasted last night,  we could easily make another move up into NFP# and even make it all back (sell off) with some help from eco’ data.   Well, we even got an unexpected ‘productivity data point’ to make Wednesday's sell off disappear and even more.    Add the positive earning report CSCO and kaboom.   The action is also an indication that people are anticipating a good job report tomorrow, but the reaction to the combination of the Jobs loss and unemployment rate is a guessing game and we can’t even begin to forecast the reaction.   This is like playing the Daily Double at the track…what combo’ may be the winner?  What if rate one is good and the other worse than expected.  This time both numbers are important.    At this point, people are anticipating a very good report with their voting already done the day before.    More importantly,  we like how positively this market has been behaving ever since we started the slide two weeks ago.   If this is the best/most bears can do to damage this market, then they are the ones who'll need mercy sooner than later. 

Technically, we are back near the previous support of SPX 1067, a close over this level almost puts the Bull in charge.  Getting over 1075 breakdown levels and 1100 is in the cards year end. 

As far as plays go, everything enjoyed a healthy day.  FSYS  and MELI, are two plays that came out with earnings/guidance that beat the expectation and got a strong reaction by the traders.   Justified or not, these two have always been interesting plays for traders.   We are keeping them on our list to see if there are trading opportunities down the road.

One possibility not discussed is nothing really happens tomorrow after all the volatility and we get a ’flat’ reaction/ close on Friday.   Why?   Since the FOMC decision eyes may have switched to BEN and his speeches on the 16th to get a better read on the FOMC statement.  Before, we have a G20 meeting/letter this weekend that may play a part next week as it may have USD implications and therefore the markets.   This 'exhaustive' outcome would be best of course!