G 'gangsta' 20!

Late last week all the noise was about the NFP#/ employment report, no one was talking about the significance about the G20 meeting in the St. Andrew's hood of Scotland and the communique to be released over the weekend.  Well, global markets proved eyes were on it!.

Thursday.."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..."

Today, all we heard was G20..G20..G20 endlessly as it was the catalyst for the market pushing towards recent highs while pushing the USD lower.   The basis of the communique read like another 'green light’ after the FOMC….a pledge to maintain efforts aimed at bolstering the economy until recovery is assured!.   This means ‘continued stimulus’.   No mention of FX didn’t hurt and the IMF gave an accompanying note saying the USD is basically ‘overvalued’ even at these levels.  Thus, Global markets rip and the money that wouldn’t come in on Friday as discussed, slowly entered the market all day as skepticism abated.   This was impressive as buy order flow continued after Europe’s close to US market as often cited here after a big day.

The action was broad based, meaning everything from USD commodity linked stocks to China to Tech to Casinos to  Reits’ were on the run to a 1093 after a surge into Bull territory over 1075 with extraordinary ease (this was the breakdown point/ important retrace level).  No defence from the Bears still shell-shocked after last week's trade.   We pointed out a light eco data week yesterday, so we’ll have little in the way of market catalysts to act upon which is better for the Bulls.   Unfortunately, after a solid 3 day rip, a 5+% rip off 1027 lows and we are technically challenged.   SPX 1000 is not the resistance in our view, SPX 1095  is the level we had problems with recently and so taking everything into effect (3 day rip+ no catalysts seemingly, technical resistance and we should pause.  

As Bulls,  we’ll watch financials for possible signals to direction, we have a Bof A conference and some earnings hitting UK (HSBC/ Barclays).  The financials will probably be the focus as the market digests everything else that has happened in the last 3 days and since SPX1027.   

A few familiar names to the DJIM 'hood to monitor tomorrow/ days to come following strong earning, PCLN GEOY HMIN. 

As we said,  Bulls will have the ball over 1075 for higher 2009 highs.  We don’t think you’ll need your helmets this time as we close in on SPX 1100.  The gap created this morning is first line of defense 1070-1072.  

..>SPX1100 close...finally

Not only did we finally close over 1100 finally,  we surged to a new intraday high of 1113.   All eyes were on Bernanke and he didn’t disappoint as he was even more ‘dovish’ than at the FOMC.  Unfortunately, eyes set on M. Whitney later and her comments hit stocks.   Still, as the case over and over again, buyers stepped up to buy any weakness and market rebounded by close.   The importance of closing over 1100 is the idea 'finally believing' money will flow into the market.   Volume has been light in this recent rip higher and MF/HF are sitting on their hands after the late October sell off in which many were closing off their fiscal.   How long will this last before they decide to chase or be outperformed once again?.   Maybe some with fiscal end in November, notably HF’s are waiting to sell this November move at the end of the month before doing something in December.   Still,  we’re only in the middle of the month and don’t have to worry about this possible selling scenario yet, the market has room to the upside and it’s next resistance lies in the 1020 2/3’s of March rebound-1022 (oct 07 50% retrace).

What we like particularly today was the small cap action as the R2K was outperforming an already hot market.  The index was up about 3% and we hope this is sign of mid small caps coming to life and potentially giving this market further lift.    We’ve had some nice moves from recent small cap mentions in journal .eg….WYNN $54's to 70, CLF, $37 eps time to 44 today GEOY $27 to 32 in 4 days, WLT, FSYS.   If this isn’t a one day wonder for R2K,  we may see other names come to life from our list (GMCR) or atleast have some pullback in these names to selectively pick at again.   Yes, some of these names can use a pullback soon.   Still, no matter what the small caps may do,  it is the Financials, notably GS  and JPM , we need to see life for more upside this year.