..Tales(s) of the tape

It’s what’s inside that counts, the saying goes!.  You can apply this to the market today.  On the surface the market grazed (off only 3.5 SPX pts) above the 1060-58 gap of October 8th,  yet the underlying market was terrible with widespread deterioration.

Weekend`s edition, we said stick to ‘bigger names’ ..small caps lagging action.  Yesterday…avoid (high beta cheap-outperformers) micro-mid-small caps.  Unfortunately, what we want to avoid is mostly what our DJIM trading list is comprised of.   Today, the selling continued and got aggressive with many of the EPS out performers being rocked…ININ, HMIN, FUQI, TXIC, TRIT, BIDU, WYNN, STEC, AONE  etc.  Some were new earning report related, others sector realted (China), some IPOs.   In the broad market, the TRAN breakdown has the SOX as a partner.    Also, even though we've avoided commodity linked stocks recently, we can't help but notice the damage done in sub groups like steel today.   This type of selling is reminiscent of the days when HF`s dumped at the end of a month(s) in 07-08. As we said yesterday, they are locking in profits as fiscal year end for many is Oct-Nov.   While the selling seems to have abated on the surface, buyers are hesitant to step up until the market finds its support level.  You should as well, if your time horizon for a trade is more than a day.   If you can flip intraday, some names will provide a trade, possibly even tomorrow after their beatings.   A stock like WYNN  that is $20 off highs and has ability to squeeze at anytime is starting to look attractive even as a longer term hold possibility, other smaller beat up names don't have the same characteristics yet.

Also from yesterday…"…be careful jumping into excellent reports with both feet immediately.  Wait for reaction to confirm buyers will still eat up growth stocks".     Today, we alerted a stock with a cautionary…'see if it catches on'.    What we see clearly now from this stock and others is even small caps are going to have a hard time catching a bid from an EPS report in this current environment.  The 'sell on the news' is spreading and we again caution about getting in on a stock early from an EPS report at this point.

SPX has been down 6 of last 8 days and 3 in a row and 1060-58 might be ST support, but the market awaits GDP (Thur) and homebuyers tax credit news/ financial bill etc.   So, while the market box score may look okay on the surface tonight,  there are ominous signals internally that require the above trading basics to stick to.

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.