Hug me...I'm tired

That’s basically all the SPX said to the flatline today as the tape rested after ripping nearly 50 handles in a few hours the past few days.   Surprisingly,  the selling/ profit taking was very orderly,  despite the second day of financials lagging.   After a break of over a week on issuances, the banks- brokers began tossing new supply out due to new rules by Treasury to exit TARP.   Shorts are trying to paint a picture of this lagging group in the advance as a fuse to breakdown,  but it’s not working as the market is saying the banks-brokers got this rally started and it’s healthy that we can move 50 SPX handles and than rest today without their participation. Still, watch carefully if all this new supply and more becomes a noise 'concern'

One of the big leading groups has been the commodity linked stocks as the PMI #’s and a collapsing USD are responsible for the latest advance and the high beta group of stocks we follow surely would be the first to take a breather.   If this is all the breathing space they need today, we’ll ..then we won’t get our welcomed pullback to buy cheaper.  But, we doubt that.   You have to be realistic here, no matter the PMI #’s forward look for the sectors, the USD has sunk about 12% from March highs and unless it’s dropped as the reserve currency overnight the equities can only rip so far before resting.  The USD, strength in it will most likely put pressure on the linked equities, so we’ll wait for such to re-initiate positions.

Some defensive posturing was underway today, but as we said a few weeks ago when those disbelievers tried to get a defensive rotation going,  we’d hang up the phone on you if you tried to request such from us.   Look back now and see what you would have missed if you let Briefingcom and such to your talking for you at that point. “ garbage rally..signs of froth”,  May 12th…The DJIM safety/ defensive trade has been a focus on earnings linked stocks,  you may say.

http://www.djimstocks.com/djim-journal-09/2009/5/13/a-healthy-tape.html

Today gave an opportunity to look around and what we found was quite a few plays, only now possibly setting up for moves such as SAFM, ARUN  that really didn’t participate in this latest rip because they have been consolidating their earning reports.   Both pressed to 2009 NCH at close after notes today. The best rip and right out of the gate today was the 17% shuttle from CVLT ,  last Wednesday we alerted it as DDUP connection and today this was highlighted by a firm and led to the burst.  A 25% move since.   Again, this pinpoints selective stock picking, we think we have accumulated an excellent group in May that has been safe (meaning you’re not losing money holding) and with good pullbacks, they pay back well if you want to book profits.   Of course, most are earning related.

On a group we haven’t covered for awhile is the Haynesville Shale grp, E&P stocks. GDP  had very strong well results Monday night and stock outperformed energy linked stocks.  PVA, last night had v.good drill as well and may react similarly off the bell.   So, we'lll monitor this theme for any further potential in days to come as well.

If today is any indication of the next 2 days leading into the NFP -employment #'s,  we`ll take it, but realistically after this rip we need to digest more than what we saw today and a stronger $USD (commods’) & possible concerns on more supply issuance by banks- brokers may provide such.

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?